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Organizing a Business to Meet Different Needs

I'm Steve Ember with the VOA Special English Economics Report.

Businesses are structured in different ways to meet different needs.

The simplest form of business is called an individual proprietorship. The proprietor owns all the property of the business and is responsible for everything. This means the proprietor receives all the profits -- but must also pay any debts. The law recognizes no difference between the owner and the business.

Another kind of business is the partnership. Two or more people go into business together. An agreement is usually needed to decide how much of the partnership each person controls.

There are limited liability partnerships. These have full partners and limited partners. Limited partners may not share as much in the profits. But they also do not have as many responsibilities.

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

The most complex kind of business organization is the corporation. Corporations are designed to have an unlimited lifetime.

Corporations can sell stock to raise money. Stock represents shares of ownership. Investors who buy stock can trade their shares or keep them as long as the company is in business. A company might use some of its earnings to pay shareholders what are called dividends. Or the company might reinvest the money into the business.

If shares lose value, investors can lose all the money they paid for their stock. But shareholders are not responsible for the debts of the corporation. A corporation is recognized as an entity -- its own legal being, separate from its owners.

A board of directors controls corporate policies. The directors appoint top company officers. The directors might or might not hold shares in the corporation.

Corporations can have a few major shareholders. Or ownership can be spread among the general public. Incorporating offers businesses a way to gain the investments they need to grow.

But not all corporations are traditional businesses that sell stock. There are non-profit groups that are also organized as corporations.

This VOA Special English Economics Report was written by Mario Ritter. Read and listen to our reports at I'm Steve Ember.