US business organizations

BUSINESS ORGANIZATIONS UNDER AMERICAN LAW

Here you’ll find a list of the most important types of business organizations under American law and some of their main characteristics.

The purpose of this article is to give you a brief overview on the different types of companies available under American law.

AMERICAN LAW

SOLE PROPIERTORSHIP

  • The sole proprietorship is formed by one owner called sole proprietor.
  • The sole proprietor has personal unlimited liability for the business debts.
  • Capital is contributed by the sole proprietor.
  • The business is managed by the sole proprietor.
  • The sole proprietorship’s existence depends entirely on its owner.

 

GENERAL PARTNERSHIP

  • A partnership is not a legal entity. It is an unincorporated entity.
  • There must be at least two partners to form a partnership.
  • Partners have unlimited liability for the obligations of the partnership.
  • Partners share profits and losses.
  • The business is managed by partners.
  • A partnership does not pay taxes as an entity. Partners are taxed on their income.
  • A partnership is dissolved upon a partner’s death, disability or withdrawal.

 

LIMITED PARTNERSHIP

  • A limited partnership is not a legal entity. It is an unincorporated entity.
  • There must be at least one partner with unlimited liability (general partner) and one or more partners with limited liability (limited partners).
  • General partners share profits and control the affairs of the partnership.
  • Limited partners are non-participating investors.
  • The limited partnership’s existence is established in its agreement. Withdrawal of a limited partner has no effect, but withdrawal of a general partner may cause dissolution.
LIMITED LIABILITY COMPANY

  • The limited liability company or LLC shares some characteristics of a partnership and a corporation.
  • It is an unincorporated entity.
  • Owners are called members.
  • Members have limited liability for the debts and actions of the LLC.
  • Capital is represented by interests in the LLC.
  • The business is run by members.
  • Main advantage: LLCs escape double-taxation. The company’s profits are passed through to members, who pay taxes on their income.
  • An LLC is dissolved upon a member’s death, disability, bankruptcy, or withdrawal.
CORPORATION

  • A corporation is a legal entity. It is formed by incorporation.
  • Owners are called shareholders or stockholders.
  • Shareholders have limited liability for the obligations of the corporation.
  • Capital is divided into shares.
  • A corporation trades shares publicly.
  • The business is run by a board of directors.
  • The corporation is taxed on its profits, and shareholders are taxed on their dividends (this is known as double-taxation)
  • The existence of a corporation is perpetual. It can be dissolved by the unanimous approval of its shareholders or by bankruptcy proceedings.
S CORPORATION

  • An S corporation is a legal entity. It is formed by incorporation.
  • Owners are called shareholders or stockholders. There cannot be more than 100 shareholders.
  • The S corporation must be a domestic corporation and its shareholders must be individuals, not partnerships or corporations.
  • Shareholders have limited liability for the debts of the corporation.
  • The business is run by a board of directors.
  • The S corporation is not taxed on its profits; the corporation’s income passes through to its shareholders who must report this in their individual income tax returns (this is known as single-taxation).

Now you’ve read all their characteristics, let’s try to compare these business organizations with the types of companies that can be formed under Argentine legislation. Can you find some equivalents?

 

 

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