Forms of Business Organization

Introduction

There are three basic forms of business enterprise in the United States:

a) The sole proprietorship,

2. the partnership, and

3. the corporation.

Sole proprietorships, usually small enterprises, are predominant in every branch of economic activity, particularly in agriculture, forestry, and fisheries, retail trade and services. Partnerships are, generally, common only in small retailing businesses, professional firms and certain real estate ventures. Corporations, though numerically smaller, do most of the business in the United States. In terms of economic significance, a few hundred very large publicly held corporations constitute the most significant part of the business community.

The choice of the best form of business organization involves many factors. On the one hand are the inherent attributes of the particular form itself – extent of personal liability and the factors of continuity of existence, management and control. On the other hand are the external factors affecting the planned venture – the nature of the market, competition/ government relations, available capital and credit sources, tax treatment, and accounting requirements in the United States as well as the economic climate.

The Sole Proprietorship

The sole proprietorship is the most common type of business enterprise found in the United States. Any individual who has the capacity to contract (i.e., who is not under age or suffering from some disability) may operate as a sole proprietor. By so doing, all of his assets, whether personal or business, are subject to the risks of his business. The operations of the sole proprietorship are generally governed by state law. There are few formalities aside from the procurement of whatever permits or licenses are required to operate the particular business. If employees are hired or if the business is operated under a name the other than that of the sole proprietor, special registration may be necessary. There are no legal requirements for an audit of the financial records of a proprietorship. The net income of the pro­prietorship is taxable to the individual proprietor.

The Partnership

The organization and activity of partnerships are governed pri­marily by state law. Fortunately, most states have adopted the Uniform Partnership Act, and the Uniform Limited Partnership Act.

In general, since the partnership is a contractual arrangement, usually evidenced by a partnership agreement, there is considerable freedom in modifying this form of organization to suit the needs of the parties involved.

A general partnership is defined as an association of two or more persons to carry on as co-owners a business for profit over a period of years. All of the partners are active in the conduct of the business, and all have unlimited liability for the partnership debts which means that partnership creditors could attach private assets of the partners.

A limited partnership must have at least one general partner with unlimited liability. Limited partners do not cake an active part in the management of the partnership, and they generally have the same right to inspect the books and records of the partnership, to receive a share of the profits, and to require dissolution of the partnership.

A special partnership is one created for a single transaction, such as the development of a real estate tract. It can also be known as a joint venture, or trading partnership is one engaged in the buying, selling, or manufacturing of goods and merchandise. A nontrading partnership is one engaged in rendering services.

Corporations

As in other countries, the corporation is a separate legal entity. It may generally be created for an unlimited period and its owners or shareholders are not personally liable for debts. They risk only their investment in the corporation.

There are basically three broad categories of corporations: public, public service, and private. The latter type of corpor­ation is privately owned for profit, and created to engage in any and all business activities. The shares of most of the larger of these corporations may be traded on a stock exchange and are owned by a large number of Individuals. Such companies are often referred to as "publicly held".

The corporate form is generally preferred by businesses for the following reasons:

1. Limited liability of shareholders.

2. Special tax benefits. However, a tax is paid by the corporation on its taxable income and again by the shareholder when dividends are distributed.

3. Ease of transfer of ownership.

4. Ease of borrowing money.

Translate the text and documents from English into Russian: