Question

What is the difference between a sole proprietorship, general partnership, limited partnership, corporation, and limited liability company?

Answer 1

Answer : The difference among a sole proprietorship, general partnership, limited partnership, corporation, and limited liability company are as follows:

Sole proprietorship

• A sole proprietorship is the most common as well as the simple form of  business structure.
• This business is owned ,managed and controlled by a single person.
• He keeps all the profits and suffers the entire losses.
• The liability of a sole proprietor is unlimited in nature that means the personal belongings of the sole proprietor can be sold off to meet the liabilities if the business assets fall short of .
• It is basically an unregistered form of business organisation and it is not mandatory to get it registered or incorporated.
• It is simplest form of business organization as it is easy to start because very less legal formalities are involved.
• The sole prop. comes to an end with the death , lunacy etc of the sole proprietor.
• Example : Chemist shop

General partnership

• A general partnership is the most common and basic  form  of partnership businesses.
• General partnership refers to an agreement between the partners whereby they agree to establish and run the  business together.
• Each partner gets the authority to make business decisions and they are  legally binding too.

• All partners in a general partnership are usullay responsible for the business and have got unlimited liability for business debts as it happens in case of sole proprietorship form of business.

• A partnership requires atleast too persons to form.

Limited partnership

• A limited partnership refers to the  relationship between the partners whereby one or more partners are not involved or alloweed  in the day-to-day management or working of the partnership business.
• A limited partner, is also known as a “silent partner,” as he /she usually serves solely either as an investor in the partnership business, by contributing the  funds that they contribute being the extent of his/her  liability.
• A limited partner does not have decision-making power in the company.

Corporation

• A Corporation or a company refers to a legal entity formed by a group of individuals to operate a business—commercial or industrial—enterprise.
• A coompany has a legal entity distinct from its members.
• It is mandatory to get the company registered.
• The contracts become binding when the company's legal seal is put on it.
• A company has a perpetual succession which means the shareholders may come and shareholders may go but the company goes on forrever.
• The liability of shareholders is limited to the value of the shares they have.
• A company is an artificial person.

Limited liability company

• A Limited Liability Company which is also known as an LLC  .
• It refers to a form of   business structure which combines the qualities of both that is a sole-proprietorship and a company.
• This form of business structure is eligible for the pass-through taxation feature of a partnership or a sole proprietorship business , while at the same time it also enjoys limiting the liability of its owners, like it happens in case of a company.