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Describe a business scenario, either real or fictional, that

Customer Question

Describe a business scenario, either real or fictional, that depicts each of the following forms of business organization:

Joint-Stock Company

Limited Liability Company

Partnership

Sole Proprietorship

The response should be 200-300 words in length.
Submitted: 5 years ago.
Category: Finance
Expert:  Milan Vaishnav replied 5 years ago.

A joint stock company (JSC) is a type of business entity: it is a type of corporation or partnership between two companies. Certificates of ownership (or stocks) are issued by the company in return for each contribution, and the shareholders are free to transfer their ownership interest at any time by selling their stockholding to others.

 

There are two kinds of joint stock company. The private company kind and the open market. The shares are usually only held by the directors and Company Secretary. Debt for which they agree to be liable.

 

For example, MICROSOFT Inc. depicts this type of company

 

Limited Liability Company

 

A limited liability company (abbreviated L.L.C. or LLC) in the law of the vast majority of United States jurisdictions is a legal form of business company that provides limited liability to its owners.

 

A Limited Liability Company (LLC) is a relatively new business structure allowed by state statute.

 

LLCs are popular because, similar to a corporation, owners have limited personal liability for the debts and actions of the LLC. Other features of LLCs are more like a partnership, providing management flexibility and the benefit of pass-through taxation.

 

Owners of an LLC are called members. Since most states do not restrict ownership, members may include individuals, corporations, other LLCs and foreign entities. There is no maximum number of members. Most states also permit "single member" LLCs, those having only one owner.

 

A few types of businesses generally cannot be LLCs, such as banks and insurance companies. Check your state's requirements and the federal tax regulations for further information. There are special rules for foreign LLCs.

 

For eg, Most states require that the company name contain one of the following terms, with some variation by state:

Limited Company, L.C., or LC

Limited Liability Company, L.L.C., or LLC

Ltd. Co., GmbH, a European form of the LLC

 

Partnership

 

A partnership is a type of business entity in which partners (owners) share with each other the profits or losses of the business undertaking in which all have invested. Partnerships are often favored over corporations for taxation purposes, as the partnership structure does not generally incur a tax on profits before it is distributed to the partners (i.e. there is no dividend tax levied). However, depending on the partnership structure and the jurisdiction in which it operates, owners of a partnership may be exposed to greater personal liability than they would as shareholders of a corporation.

Eg, Mr. X,Y and Z and Co. (where X, Y, and A are presumed to be partners)

 

Sole Proprietorship

 

A sole proprietorship, or simply proprietorship (British English: sole trade) is a type of business entity which legally has no separate existence from its owner. Hence, the limitations of liability enjoyed by a corporation and limited liability partnerships do not apply to sole proprietors. All debts of the business are debts of the owner. The person who sets up the company has sole responsibility for the company's debts. It is a "sole" proprietorship in the sense that the owner has no partners (partnership). A sole proprietorship essentially refers to a natural person (individual) doing business in his or her own name and in which there is only one owner.

 

A sole proprietor may do business with a trade name other than his or her legal name. In some jurisdictions, for example the United States, the sole proprietor is required to register the trade name or "Doing Business As" with a government agency. This also allows the proprietor to open a business account with banking institutions.

 

References:

http://www.irs.gov/businesses/small/article/0,,id=98277,00.html

http://en.wikipedia.org/wiki/Limited_liability_company#Names_and_abbreviations

http://en.wikipedia.org/wiki/Joint_stock_company

 

I hope the above helps,

 

Regards,

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Milan Vaishnav
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Technical Analyst in Financial Markets -- Experience of more than 10 years in consulting