Forms of Business Organization

Flashcards about business organizations

Sole Proprietorship

Unincorporated business owned by one person where the owner has total control and unlimited liability. Profits are taxed directly as income to the sole proprietor.

General Partnership

Unincorporated business owned and operated by two or more persons. Each partner has equal control and unlimited, personal liability for business debts/obligations. Profits are taxed as income to partners.

Limited Partnership

Unincorporated business with at least one general partner and one limited partner. The general partner has managerial/operational control, while the limited partner's liability is limited to the extent of his or her capital contributions and has no managerial control.

Corporation

State-sanctioned business with legal identity separate from its owners (shareholders). Owners' liability is limited to the amount of investment. Profits are taxed as income to the corporation and as income to owners/shareholders (double taxation).

S Corporation

Business organization formed under federal tax law; considered a corporation yet taxed like a partnership. It cannot have more than 100 shareholders, and shareholders must report income on their personal income tax forms.

Limited Liability Company (LLC)

Business organization with limited liability of a corporation yet taxed like a partnership. Formed under state law, the owners pay personal income taxes on shares they receive, and there is no limitation on the number of owners.

Cooperative

Organization formed by individuals who pool resources to gain market advantage; can be incorporated or unincorporated.

Joint stock company

Partnership agreement in which company members hold transferable shares while company goods are held in names of partners.

Business trust

Business organization governed by group of trustees who operate trust for beneficiaries.

Syndicate

Investment group formed for purpose of financing specific large project.

Joint venture

Relationship between two or more persons or corporations created for a specific business undertaking.

Franchise

Agreement between franchisor (owner of trade name/trademark) and franchisee (person who, by specific terms of agreement, sells goods/services under that trade name/trademark).

Chain-style business operation

Type of franchise that operates under franchisor's business name and is required to follow franchisor's standards and methods of business operation.

Distributorship

Type of franchise where the franchisor manufactures a product and licenses a dealer to sell in an exclusive territory.

Manufacturing arrangement

Type of franchise where the franchisor provides franchisee with technical knowledge and license to manufacture franchisor's product.