There are three main types of business, which include sole proprietorship, partnership as well as incorporated business known as corporations or companies (‘Ownership Structures, 2008’). These businesses differ from each other in terms of their structure, their operation as well as in terms of how they are legally represented in the market. The ownership and liability of the owners in these structures is also significantly different. In this paper however Partnership and Corporations are discussed in detail.
A partnership business is based on an agreement between two or more partners who invest resources, capital and time in launching the business and keeping it operational. “You don’t have to file any paperwork to form a partnership — the arrangement begins as soon as you start a business with another person.” (‘Ownership Structures, 2008’, p2) The partnership is built around the partnership agreement in which the specific partners are identified, the roles of the partners are outlined and the capital invested by the partners is clearly depicted. Additionally the agreement also highlights the profit sharing ratios of the partners, according to which the partners distribute the profits of the business amongst themselves.
“It is difficult to think about a “break-up” when the business is just getting started, but many partnerships split up at crisis times and unless there is a defined process, there will be problems. They also must decide up front how much time and capital each will contribute.” (‘Sole Proprietorship vs. Partnership vs. Limited Liability Company (LLC) vs. Corporation vs. S Corporation’)