Common Types of Corporate Formations

The term business refers to any entity or agency that is engaged in professional, commercial, or organizational activities. Business enterprises can either be sole proprietors, for-profits, or governmental agencies. Examples of business enterprises include publicly traded corporations, partnerships, cooperatives, trusts, franchises, cooperative businesses, and privately owned firms. Business forms range from single-owner family businesses to multi-million dollar corporations. There are also B2B industries such as the information technology, automobiles, and healthcare industries.

BUSINESS

A private firm is usually a corporation organized for the purpose of earning profit by engaging in commerce or manufacturing. Many businesses are B2B in nature. The term publicly traded refers to a company that trades publicly on the stock exchange (TSE). On the other hand, a company is publicly traded only when it trades on major exchanges such as the New York Stock Exchange (NYSE) or NASDAQ. Examples of publicly traded corporations include CitiBank, State Street, Fidelity Investments, Silverstein Properties, spun off companies, and publicly traded partnerships such as Yahoo and Microsoft.

A partnership is considered to be a commercial entity when one or more individuals form a commercial entity and hold shares in that entity. Partnerships may be limited liability partnerships (LLPs), proprietor-operators, C corporation, partnership, and limited liability partnership (LLP). Limited liability partnerships (LLPs) allow the partners to carry their own weight in the partnership while being taxed as an individual. A C corporation is a publicly held corporation that has been established for one or more qualified purposes. All corporations are domiciled in the state in which they register. Limited liability partnerships operate similarly to a sole proprietorship.

When a person, group, or institution wants to open a new business entity, they would first need to obtain a certificate of authority from a jurisdiction that either recognizes their business name or allows a special business name. After that, they will need to file a fictitious name application with the appropriate state or county. The next step would be to file articles of incorporation or construction. This is where business entities would enter into contracts and legal documents related to the formation of the business. Business name acquisition cost is determined by the state that would correspond to the amount of funds needed to purchase or lease the business name. Lastly, a business entity would then submit an application for certificate of occupancy.

Many businesses use what are called corporations or limited liability companies (LLCs) as the ultimate holding company in transactions. There are many reasons why an LLC is popular including the fact that it protects against double taxation, provides the shield from creditors, and allows the owner to retain his/her assets in the case of bankruptcy. An LLC may be in any state and has very few restrictions. The general rule is that the owners should meet all the requirements for the formation of a corporation but should also follow the state rules related to the maintenance of capital.

The most common type of LLC is a simple partnership that has separate legal entity from which tax returns can be filed. Several types of partnerships include a general partnership and a limited liability partnership (LLP). A limited liability partnership (LLP) is also commonly referred to as a “Pass-through” or “Sole proprietorship.” Other common types of LLCs include: real estate partnerships, limited liability partnerships, joint ventures, investment partnerships, rent collection agencies, registered agents, trade names, and unincorporated organizations.