Business Entity

A business entity is an organization entity created and operated according to commercial law to conduct business activities.

Sole Proprietor

A sole proprietor is a person who is the owner of a business which is unincorporated. This type of business cannot exist as a legal entity, but refers to the owner of the company who is personally liable for its debts.

Are the Assets of a Sole Proprietor Protected?

The assets of the owner are subject to the liabilities of a sole proprietorship business.

Partnership

A partnership refers to a business formed by two or more persons who share the management of the business, its profits, and are personally liable to the business. Partnerships don't pay income tax as the profits and losses of the business are passed to its partners. Individual partners then add their own share of the partnership's profit or loss when filing their personal tax returns.

Are the Assets of the Partners Protected?

All the assets of each partner which are not nonexempt are subject to the liabilities of the partnership business.

Corporation

A corporation is a legal entity that can exist independent of its owners. A corporation is considered to be a legal "person" which can perform business transactions and sign contracts with members of the public, can be taxed, and can file lawsuits and be sued.

Board of Directors

A board of directors is responsible for choosing and overseeing the management team who run the operations of the corporation on a daily basis.

Shareholders

Shareholders are individuals who hold ownership interests of a corporation by buying the stocks of the company.

Are the Shareholders Liable for the Corporation's Debts?

The shareholders of a corporation are not personally responsible for the company's debts as corporations have limited liability.

How Is a Corporation Taxed?

A corporation is taxed based on whether the business is a C corporation or an S corporation.

  • C corporations pay taxes on their profit based on corporate rates, and shareholders also pay tax on their share of the corporation's profits, which is paid as dividends.
  • S corporations pass the total net income to shareholders, while the corporation does not pay any tax. For more information about taxing S corporations.

LLC

An LLC is a business entity which has the components of both a partnership and a corporation as it has the limited liability of a corporation and the pass-through taxation of a partnership.

Members

The people who own interests in an LLC are known as members.

What Document Governs an LLC?

An LLC is administered with an operating agreement.

Professional Limited Liability Company

PLC and PC are abbreviations of professional limited liability company and professional company respectively.

Professional Limited Liability Company

These are entities that offer licensed professional services, like health care professionals, attorneys, accountants, and engineers.

Private Limited Company

This is an entity whose stocks cannot be purchased by the general public. A small group of individuals owns the stocks of this company. The name of these entities usually ends with Pvt. Ltd.

Subsidiary

A subsidiary is a company which is owned or controlled by another company. The subsidiary can be a limited liability company, company, or corporation. Sometimes, a subsidiary is owned by the government.

Chartered Company

A chartered company is an association created by shareholders or investors with the aim of colonization, exploration, or trade.

What Is a Public Limited Company (PLC)?

A public limited company (PLC) is a limited liability company (LLC) which has limited liability and whose shares can be bought by the general public.

The stock of a PLC can be purchased by anybody either publicly on the stock market, during initial public offerings, or privately.

Generally, PLC is more common to companies in the United Kingdom and other Commonwealth countries, however, businesses in the USA and other places mostly use "Ltd" and "Inc."

The obligatory inclusion of the PLC abbreviation after a company's name helps to quickly show investors and other people interested in the company it is a publicly traded company with relatively large operations.

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