Question

The basic concepts of financial management are the same for all businesses, regardless of how they are organized. However, a firm's legal structure affects its operations. The main forms of business organizations are: (1) proprietorships, (2) partnerships, (3) corporations, and (4) limited liability companies (LLCs) and limited liability partnerships (LLPs).

Answer 1

The following are various forms of businesses and brief elaboration on how the legal structure of these businesses affect each:

• Proprietorship: A proprietorship business is allowed to have a single owner who is responsible for the functional legalities of the business.
• Partnership: A partnership business can have multiple owners with shared legal responsibilities associated with the business. Other than legal responsibilities, ownership and profits are also legally shared in this type of business.
• Corporations: These businesses do not dispense individual ownership. These are run by multiple stakeholders sharing responsibilities amongst themselves.
• LLCs and LLPs: The legal structure of these businesses is complicated as each player in the business has equal say in the functionality decision of the business.