Sole Proprietorship

Definition

Formation

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Definition: A business in which one person owns all the assets, owes all the liabilities, and operates in his or her personal capacity. (Black’s Law Dictionary).

Formation: There are no legal forms to fill out or structure to create. However, in many states, the owner must register with the state or local government if the business uses a trade name or a fictitious name.

 

Learn More in Chapter Five.

Sole Proprietorship
Partnership

Definition

Formation

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Definition: A voluntary association of two or more persons who jointly own and carry on a business for profit. (Black’s Law Dictionary).

Formation: Partnerships can be formed without filing forms or registering. Typically, the best way to create one is to enter a written legal “partnership agreement,” but courts have ruled that a partnership exists, even where there is no written agreement.

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Partnership
Limited Partnership

Definition

Formation

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Definition: A partnership with general partners who run the business and are personally liable and limited partners that are only liable to the extent of their investments in the business.

Formation: All states have adopted laws governing the formation of limited partnerships, which usually, if not always, require a certificate of limited partnership be filed with the Secretary of State.

Learn more in Chapter Five.

Limited Partnership
Corporation

Definition

Formation

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Definition: A business form with authority to act as a single person distinct from the shareholders who own it. There are a variety of types of corporations with different advantages and disadvantages relating to taxes, liability, and other matters.

Formation: Corporations are created under state law by filing articles of incorporation with the statutorily specified department, typically the Secretary of State.

Learn more in Chapter Five.

Corporation
LLC

Definition

Formation

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Definition: A company that is characterized by limited liability, management by members or managers, and limitations on ownership transfer. (Black’s Law Dictionary).

Formation: Statutorily authorized only in some states, legal requirements for formation will vary depending on the type of business formed.
 
 

Learn more in Chapter Five.

LLC
Cooperative

Definition

Formation

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Definition: An organization or enterprise (as a store) owned by those who use its services. (Black’s Law Dictionary).

Formation: Like a corporation, a cooperative is typically required to file articles of incorporation or articles of organization with the state’s Secretary of State. The cooperative is usually considered to exist upon approval by the Secretary of State and issuance of a certificate of incorporation.

Learn More in Chapter Five.

Cooperative