Business Associations

Business Associations

The sole proprietorship is the simplest type of business organisation. This means that a person who has a shop, for example, can carry on business as the sole proprietor or owner. This kind of business together can either form a company or a business association called a partnership. Partners can either contribute with their work (a working partner) or their capital (a sleeping partner). In general, a contract is signed specifying each partner`s duties and how the profits will be divided. This contract is very important because it may provide solutions to conflicts, in cases of disagreement, or problems between partners. In most cases partners invest equal capital, get equal profits and share authority. There is a category of partnership known as a LIMITED PARTNERSHIP, which means that each limited partner is only liable, in a case of bankruptcy, for the money he or she invested in the business. On the other hand, in the case of partnerships of UNLIMITED LIABILITY, partners are liable not only for the money invested in the business, but all their individual assets are at risk. A corporation is another kind of business association.

It is owned by stockholders who invest money in a business by buying shares. A stockholder owns a part of the company proportional to the number of shares he or she has bought. Generally, stockholders do not take part in running the business. They hire the most efficient person they can find to manage the business.

If a business fails, the stockholders lose only they money they have paid for the shares. If the business is profitable, they can make a lot of money.