A business is defined as any entity or company legally registered for conducting commercial, professional, agricultural, or service activities for profit. Businesses may be sole proprietorships, partnership/firm structure with one or more partners, or corporations organized as partnerships. Most businesses are conducted for profit. Business enterprises may be sole proprietors, for-profit, cooperative, mutual, or proprietary organizations.
The economic activity of business includes the production, distribution, and marketing of products and services to earn income. Labor or other resources are invested in order to produce economic surplus. Profits are the result of the difference between investment and the selling price. Business enterprises differ from corporations in that corporations are legal papers or corporation forms which do not have any affect on ownership rights and capitalization. Business enterprises are managed by boards of directors who are elected or appointed for terms specified by the shareholders. Capital assets, such as fixed assets and equities, are financed through borrowing and dividends paid by the shareholders to the creditors.
Most of the differences between capitalism and communism come from the differences in ownership rights, capital structure, management, and entrepreneurial skills of the owners and managers of the corporation or business. “communism” would require all workers to collectively own and manage the corporation, and there would be no option to choose partners. A “for-profit” corporation would allow the owners to run the corporation freely, set their own working hours, hire and fire employees, hire or remove sub-contractors, and decide how to distribute profits among the partners. No one could sell his shares or be paid for his services except to buy back his own shares at a predetermined rate.
The limited liability company, or LLC, is another popular choice for many businesses. An LLC is often used as the nominee owner for the purpose of avoiding personal taxes. Limited Liability Company status provides advantages to those wishing to incorporate a business: it allows easy transfer of ownership, provides protection from lawsuits, and protects the owner from double taxation. Unlike partnerships, a limited liability company is not run by its owners, so there is no general partner and there is no voting or dividend approval process.
Business owners seeking to incorporate an LLC can consult with an attorney who specializes in the formation of limited liability companies. Another option is to begin the process by using an online service that offers assistance in selecting businesses that are seeking to use an LLC form. Online services will provide businesses with a list of dozens of LLCs available to choose from and provide basic information about each one. Depending on the nature of the business, several factors may affect the choice of an LLC. A website that specializes in finding businesses that are set up as an LLC may have more detailed information than a general business site that provides general information about different types of businesses.
There are some characteristics that both systems share that are important to all entrepreneurs looking to incorporate a business. Limited liability companies are required to follow certain rules, have to be registered with the state, and cannot operate beyond the state limits. All businesses must be publicly conducted, and they cannot be operated by anyone other than the owners. The term “incorporated” in a state could apply to a partnership, an LLC, or a corporation. Each has advantages and disadvantages when it comes to the specific business needs of an individual or family.
LLCs are also easier to incorporate because most have “limited partners.” Limited partnerships are simply individuals or groups that take on the liability of another person or entity, but are not considered “persons” for tax purposes. This means that an LLC does not have to pay taxes on its personal assets. In general, LLCs are easier to set up than corporations, which can require hundreds of pages of filings to the state.
Both an LLC and a corporation are simple forms that provide different means of doing business, but each has different aspects and differences. When deciding whether to incorporate your business, you should carefully consider whether an LLC is right for your business and your personal needs. Both types of company provide different protections, and one may be right for you depending upon your goals and personal circumstances. If you need more information about llcs and llc’s in your state, the SBA’s web site offers valuable resources that will help you determine which type of company is right for you.