This is Bob Doughty with the VOA Special English Economics Report.
Businesses are structured to meet different needs. One basic difference involves who is responsible for the business. Another involves how long the organization can stay in business. Today we begin a report about ways that businesses are organized under United States tax law.
The simplest form of business is called an individual proprietorship. The word proprietor comes from French and Latin words for property owner. The proprietor owns all the property of the business and is responsible for it. This means the proprietor receives all the profits.
But this also means that the proprietor is responsible for all the debts of the business. Also, any legal action against an individual proprietorship is taken against the owner. The law recognizes no difference between the owner and the business.
Most small businesses in the United States are individual proprietorships. The Census Bureau says there are more the twelve-million of them. United States tax law has simpler reporting requirements for these kinds of businesses. One person may be able to complete all the tax documents required.
Another kind of business is the partnership. Two or more people go into business together. An agreement is usually needed to state how much of the partnership each person controls. They can end the partnership at any time.
But partnerships and individual proprietorships have a limited life. They exist only as long as the owners are alive.
Some states permit what are called limited liability partnerships. These have full partners and limited partners. Limited partners may not share as much in the profits. But their responsibilities to the organization are also limited.
A partnership is often called a pass-through entity: money passes through it to the individual partners. The federal government does not tax partnerships. But the partners are taxed on the payments they receive.
Doctors, lawyers and accountants often form partnerships to share the profits and risks of doing business. A husband and wife can form a business partnership. The Census Bureau says there are more than one-million American partnerships.
Partnerships and individual proprietorships are usually small business organizations. Next week, we discuss a bigger kind: the corporation.
This VOA Special English Economics Report was written by Mario Ritter. This is Bob Doughty.