A limited partnership must use the term “Limited”, “Ltd.”, or “L.P.” in its name.

A corporation is owned by persons, called stockholders. The stock- holders usually have certificates showing the number of shares which they own. The stockholders elect a director or directors to operate the corporation. Most corporations are closed corporations, with only a few stockholders who buy and sell their shares at will. Usually they have little interest in management of the corporations.

A corporation must use “Corporation”, “Incorporated”, “Company”, or an abbreviation of one of those words in its name.

Alien corporations are corporations of foreign countries. All the corporations are to receive their charters from the state authorities. The charters state all the powers of the corporation. Many corporations try to receive their charters from the authorities of the State of Delaware because the laws are liberal there and the taxation is rather low. Such corporations, which receive their charters from an outside state, are called foreign corporations.

All the corporations require a certificate to do business in the state where they prefer to operate.

Questions to the text:

1. What is a sole proprietorship?
2. What can a sole trader do with the property of the business?
3. Is the record-keeping and report-filing so necessary for sole traders in the USA?
4. What is a general partnership?
5. Why is the general partnership the simplest form of an organization?
6. Who is responsible for partnership’s debts?
7. Can of the partner be a general and a limited partner in a limited partnership?
8. What is the difference between general and limited partners?
9. What liabilities do the general and limited partners have?
10. Why is it better for the partners to enter into a written or oral agreement?

Forms of Business Ownership

Active vocabulary

Business is a commercial enterprise performing all those functions that govern the production, distribution, and sale of goods and services for the benefit of the buyer and the profit of the seller. Since the beginning of the era of economic progress old ways of running business have been modified, and new forms of business organization have been introduced. This has enabled various branches of industry to adapt to changing conditions and to function more easily, efficiently and probably, sole proprietorship, partnership, and corporation being the main three forms of business ownership.

A sole proprietorship is a business owned by one person, in which all the profits belong to the owner, the latter being fully responsible for the success and the failure of the business. Unless an activity is specifically prohibited by law, no field of business is closed to an owner. Although advantages for the small business exist in this form, certain drawbacks make it undesirable for larger concerns. In the first place, the single owner is seldom able to invest as much capital as can be obtained by a partnership or a corporation. If single owners are able to invest large amounts of capital, they run great risk of losing it all because they are personally liable for all the debts of their business. It is due to unlimited liability that all the personal assets of the owner, including his home and car, can be sold to settle the debts of the business. Unless the owner has much personal wealth, the business may have difficulty borrowing money in critical times. A sole proprietorship may also have difficulty hiring and keeping good employees, because the business will dissolve when the owner retires or dies.

A partnership is association of two or more persons who have agreed to combine their financial assets, labour, property, and other resources as well as their abilities and who carry on a business jointly for the purpose of profit. The agreement the partners usually sign to form an association is known as a partnership contract and may include general policies, distribution of profits, responsibilities.

Like the sole proprietorship, the partnership is easy to establish, and its profits are not subjected to federal corporation taxes. Financing is generally easier to obtain because the personal assets of the group are usually larger and the chances of success are higher. The major disadvantage of the partnership is unlimited liability of each partner for the debts of business, that is, complete financial responsibility for losses. Furthermore, partners who wish to retire may find it difficult to recover their investments without dissolving the partnership and ending the business.

A business corporation is an organization created by law that allows people to associate together for the purpose of making profit. Corporations are also known as joint-stock companies because they are jointly owned by different persons who receive shares of stock in exchange for an investment of money in the company. Shares represent fractions of the company’s assets such as cash, equipment, real estate, manufactured goods, etc.

Though the corporation is more difficult and expensive to organize than other business forms it has a number of advantages. First, investors can limit their personal liability to the amount of money they have invested, thus, if the corporation goes bankrupt, they can lose no more than they have put in. Second, money to operate the business is obtained by the sale of stocks to the general public and this enables the corporation to exist independently of its owners. The corporation also finds it easier to borrow money from banks and it is also a successful means for attracting large amounts of capital and investing the latter in plants, modern equipment and expensive research. Salaries large corporations can offer to managers and specialists are high and that allows corporations to hire professional and talented employees.

The great drawback of the corporate form of ownership is double taxation of profits which means that business corporations must pay taxes on the income they receive as dividends on their stock. Different kinds of reports to be filed to federal and state regulatory agencies about the corporation activity can also be considered as another disadvantage of this business form. However, in terms of size and influence it is the corporation that has become the dominant business form existing in most countries with free market economy.

Ответьте на вопросы к тексту Forms of Business Ownership.