The word business refers to any entity or organization engaged in business that essentially deals with the procurement of raw materials, working capital, and profit. Businesses may be for profit organizations or non-profit enterprises. Regardless of the nature of the business, it seeks to generate income through production, sales, and service.
In terms of legal structure, the term business includes corporations, partnerships, LLCs, and sole proprietorships. Business entities are established for various reasons, but one of the most important reasons is to create a standing credit line that will allow businesses to obtain credit at low interest rates. Many business plans also include the borrowing of funds from other investors. This borrowing is referred to as venture capital.
Every state requires a minimum number of shareholders in order to qualify for corporate taxation. However, corporations are not liable to pay taxes unless they choose to. In most states, corporations are considered separate legal entities from their owners and are treated as such for tax purposes. Several types of corporations exist, including C corporations, D corporations, and E corporations.
One of the main differences between a partnership and a corporation is share capital. Share capital is capital contributed by shareholders to a business entity in exchange for a right to receive dividends. Like partnership shares, however, these dividends are only received if the corporation meets its operating requirements, including meeting payroll, paying property taxes, and fulfilling environmental statutes. Similarly, unlike liability shares, which are issued by an entity without the permission of shareholders, share capital is issued only after the payment of taxes.
Determining what type of business entity best suits your goals, assets, and situation is the main article of any commercial law case. For example, a limited liability company has the same basic features as a partnership, except that it limits liability while having the convenience of having just one set of officers. Limited liability companies are commonly used for main article businesses such as shops and boutiques, while corporations are often used for more complex businesses involving many different partners. Determining which option is best for you depends on the nature of your undertaking, the available financial resources you have available to you, and the ways in which the law will generally affect you. Consult a qualified attorney to discuss your options.
A corporation and sole proprietor both have legal rights and responsibilities, but the ways in which they will be defined differs. A corporation has the same standing as sole proprietorships in most areas of the law, while a sole proprietor stands alone in certain legal aspects. Limited liability companies and general partnerships are much more complicated entities, so a qualified attorney is necessary to help you decide how to structure your venture. Consulting a business lawyer is also a wise decision should you wish to incorporate a new company or take control of an existing company that is already legally operational. Commercial law can often be a highly confusing field, but it can also be very rewarding if you take the time to learn about the various facets of this area of study.