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Different Types of Business Entities

BUSINESS

Different Types of Business Entities

Business refers to an entity where individuals work as one unit. In a normal business, individuals work together to either make and sale goods or services. The word business actually comes from the words commerce and working together. So business really is just the act of selling and making transactions with other people.

The act of making transactions and the legal ownership of those transactions are what business is all about. This makes up the crux of the entire concept of commercial law. There are various different kinds of businesses. Some of these include the following:

Corporations, which are also called corporations by common law, are considered to be a particular kind of business. However, corporations are not one type of business, but rather there are two main types of corporations. They are: A general partnership and a limited liability company. A general partnership is when two or more people enter into a partnership without having a control over each other. A limited liability company, on the other hand, is a separate entity that carries its own legal structure and is completely responsible for its own activities.

Another kind of business is the partnership. Partnerships are formed for a variety of reasons, including the sharing of liability and ownership responsibilities. Partnerships are normally classified as general partnerships or as limited liability partnerships. In the case of general partnerships, both the partners have shares in the same entity.

A business entity can be further broken down into another few different types. For instance, a partnership can turn into a corporation or an LLC, which is also a separate legal entity. A Limited Liability Company is basically a partnership without all of the partnership’s responsibilities. Finally, there is the S corporation, which is a small business entity that has very limited benefits compared to other types. Each of these different business entity types has their own advantages, but each also has their disadvantages as well.

As you can see, all of these different types of business entities have different benefits and disadvantages. Many businesses, even those that do not fall into any of these categories, operate using a combination of these business models. For instance, a sole proprietorship is most often used as a sole entity to start a business, while a limited liability partnership and a corporation are commonly used when a business owner wants to protect his assets by creating a separate legal entity. This separation will give each of these companies the security it needs to succeed and will help it to stay away from fraud and various forms of abuse.