Hospitality Business Structures

Organizational Structure

The legal entity that owns a business.

Operational Structure

The relationship between a business’s ownership and its management.

Sole Proprietorship

A business organization in which one person owns and operates the business.

General Partnership

A business organization where two or more owners share profits and are jointly liable for debts.

Limited Liability Partnership (LLP)

A business organization with limited partners who invest but do not control operations, and general partners who manage and are liable for debts.

Limited Partner

An entity or person in a limited partnership liable only to the extent of their investment, with no management rights.

General (or managing) Partner

The entity or person in a limited partnership responsible for management decisions and liable for debts.

Corporation

A group of individuals recognized as a separate legal entity with distinct rights and liabilities (C corporation).

Dividends

A portion of profits received by a shareholder based on their ownership in a corporation.

S Corporation

A business entity offering liability protection to owners and exempt from corporate taxation on profits, with certain restrictions.

Limited Liability Company (LLC)

A business organization protecting owners from liability for debts without formal incorporation requirements.

Owner-Operator

An operating structure where business owners are responsible for day-to-day operations, also known as "independent."

Franchise

A contract allowing a franchisee to operate a business under the brand name of a franchisor, following specific operational methods.

Franchisee

The person or business that purchases or receives a franchise.

Franchisor

The person or business that sells or grants a franchise.

Management Contract

A legal agreement defining the responsibilities of a business owner and the management company.

Shared Services

A term referring to a sharing economy, exemplified by platforms like Airbnb and VRBO.

Respondent Superior

A legal theory holding the employer responsible for the acts of the employee.

Principal

The employer who hires and directs employees (agents) to perform business tasks.

Agent

A person authorized to act for or represent another, typically the principal.

Fiduciary Responsibility

The requirement for agents to act in the best interest of their principals.

Independent Contractor

A person or entity contracted to perform a task, whose work is not directed or controlled by the hiring party.