Business Organizations


2005-2-10

I'm Gwen Outen with the VOA Special English Economics Report.

Businesses are structured in different ways to meet differentneeds.

The simplest form of business is called an individualproprietorship. The proprietor owns all the property of the businessand is responsible for it. This means the proprietor receives allprofits -- but also must pay any debts. The law recognizes nodifference between the owner and the business.

Another kind of business is the partnership. Two or more peoplego into business together. An agreement is usually needed to statehow much of the partnership each person controls.

There are limited liability partnerships. These have fullpartners and limited partners. Limited partners may not share asmuch in the profits. But their responsibilities are also limited.

In the United States, the federal government does not taxpartnerships. The partners are taxed, though, on the payments theyreceive.

Doctors, lawyers and accountants often form partnerships to sharethe profits and risks of doing business. A husband and wife can forma business partnership.

Partnerships can end at any time. But partnerships and individualproprietorships exist only as long as the owners are alive.

The most complex kind of business organization is thecorporation. Corporations are designed to have an unlimitedlifetime.

Stock is a share of ownership in a corporation. Investors who buystock can trade their shares or keep them as long as the company isin business. A company may pay shareholders in the form of what arecalled dividends. Or the company may reinvest its earnings into thebusiness.

If shares lose value, investors can lose all the money they paidfor their stock. But shareholders are not responsible for the debtsof the corporation. A corporation is recognized as its own legalbeing, separate from its owners.

A board of directors controls corporate policies. The directorsappoint top company officers. The directors might or might not holdshares in the corporation.

Corporations may have a few major shareholders. Or ownership maybe spread among the general public. Incorporating offers businessesa way to gain the investments they need to grow.

But not all corporations are traditional businesses that sellstock. The American Red Cross is an example of a non-profitcorporation.

This VOA Special English Economics Report was written by MarioRitter. I'm Gwen Outen.