Types Of Business Organizations, Partnerships, And Limited Liability Partnerships

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There are various types of business organizations including, sole proprietorships, partnerships, corporations, limited liability companies, and limited liability partnerships (Jennings 587-619). *Sole proprietorships represent a general form of a business entity that consists of only one individual operating the business (Jennings 587). Because sole proprietorships are not separate organizations, it has no formal requirements for formation (Jennings 587). The individual simply begins doing business, to get started (Jennings 587). It is important to note that to receive financing, a sole proprietor takes personal financial risk (Jennings 587). Furthermore, if in debt, a sole proprietor is subject to have his or her personal assets taken away (Jennings 587). Although sole proprietors owe all the taxes, they also get the benefit of all business deductions (Jennings 588). *Next, we have partnerships. Partnerships are the association of two or more persons to carry on as co-owners of a business for profit (Jennings 588). A partnership is formed voluntarily by direct action of the parties, such as through a partnership agreement, articles of partnership, or ongoing conduct of the parties (Jennings 588). Funding comes from the partners who initially contribute property, cash, or services to the partnership accounts (Jennings 592). Regardless of most matters, partners’ personal assets are on the line. Partners are personally liable for the full amount of the partnership’s obligations (Jennings 593). In essence, a partnership does not pay taxes. It simply files an informational return, while each partner must report their shares of partnership income or losses and deductions (Jennings 594). *Limited Partnerships are partnerships with a sl... ... middle of paper ... ... 617). LLCs are formed through filing the articles of organization (Jennings 617). The funding comes from capital contributions (Jennings 618). LLCs do not pay taxes and members adopt an operating agreement that specifies the voting rights (Jennings 618). LLCs are transferable! *Limited Liability Partnerships or LLPs is a partnership with unique statutory protection for all its members (Jennings 619). The formation is formed by filing the articles and its source of funding comes from the partners making capital contributions (Jennings 619) (Jennings 620). The liability for LLPs is varied by state, but is more so limited than not (Jennings 620). They are flow-through entities and partners can manage without risking personal liability exposure (Jennings 620). The transferability must be restricted, no admission without consent of majority (Jennings 589) (Jennings 620).

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