Corporate forms

See also: List of legal entity types by country

## Company

From Company

A **company**, abbreviated as **co.**, is a legal entity made up of an association of people, be they natural, legal, or a mixture of both, for carrying on a commercial or  industrial  enterprise. Company members share a common purpose, and unite to focus their various talents and organize their collectively available skills or resources to achieve specific, declared goals. Companies take various forms, such as:

* voluntary associations, which may include nonprofit organizations
* business entities with an aim of gaining a profit
* financial entities and banks

A company or association of persons can be created at law as a legal person so that the company in itself can accept limited liability for civil responsibility and taxation incurred as members perform (or fail to discharge) their duty within the publicly declared *"birth certificate"* or published policy.

Companies as legal persons may associate and register themselves collectively as other companies – often known as a corporate group. When a company closes, it may need a *"death certificate"* to avoid further legal obligations.

One can define a company as an "artificial person", invisible, intangible, created by or under law,
with a discrete legal personality, perpetual succession, and a common seal. Companies remain unaffected by the death, insanity, or insolvency of an individual member.

## Conglomerate (company)

From Conglomerate (company)

A **conglomerate** is a combination of multiple business entities operating in entirely different industries under one corporate group, usually involving a parent company and many subsidiaries. Often, a conglomerate is a **multi-industry company**. Conglomerates are often large and multinational.

Conglomerates were popular in the 1960s due to a combination of low interest rates and a repeating bear-bull market, which allowed the conglomerates to buy companies in leveraged buyouts, sometimes at temporarily deflated values. Famous examples from the 1960s include Ling-Temco-Vought, ITT Corporation, Litton Industries, Textron, Teledyne. Because of low interest on the loans, the overall return on investment of the conglomerate appeared to grow. Also, the conglomerate had a better ability to borrow in the money market, or capital market, than the smaller firm at their community bank.

For many years this was enough to make the company's stock price rise, as companies were often valued largely on their return on investment. The aggressive nature of the conglomerators themselves was enough to make many investors, who saw a "powerful" and seemingly unstoppable force in business, buy their stock. High stock prices allowed them to raise more loans, based on the value of their stock, and thereby buy even more companies. This led to a chain reaction, which allowed them to grow very rapidly.

However, all of this growth was somewhat illusory and when interest rates rose to offset inflation, conglomerate profits fell. Investors noticed that the companies inside the conglomerate were growing no faster than before they were purchased, whereas the rationale for buying a company was that "synergies" would provide efficiency. By the late 1960s they were shunned by the market, and a major sell-off of their shares ensued. To keep the companies going, many conglomerates were forced to shed the industries they had recently purchased, and by the mid-1970s most had been reduced to shells. The conglomerate fad was subsequently replaced by newer ideas like focusing on a company's core competency.

In other cases, conglomerates are formed for genuine interests of diversification rather than manipulation of paper return on investment. Companies with this orientation would only make acquisitions or start new branches in other sectors when they believed this would increase profitability or stability by sharing risks. Flush with cash during the 1980s, General Electric also moved into financing and financial services, which in 2005 accounted for about 45% of the company's net earnings. GE formerly owned a minority interest in NBCUniversal, which owns the NBC television network and several other cable networks. In some ways GE is the opposite of the "typical" 1960s conglomerate in that the company was not highly leveraged, and when interest rates went up they were able to turn this to their advantage. It was often less expensive to lease from GE than buy new equipment using loans. United Technologies has also proven to be a successful conglomerate.

With the spread of mutual funds (especially index funds since 1976), investors could more easily obtain diversification by owning a small slice of many companies in a fund rather than owning shares in a conglomerate. Another example of a successful conglomerate is Warren Buffett's Berkshire Hathaway, a holding company which used surplus capital from its insurance subsidiaries to invest in a variety of manufacturing and service businesses.

## Cooperative

From Cooperative

A **cooperative** (also known as **co-operative**, **co-op**, or **coop**) is "an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise". Cooperatives may include:

* businesses owned and managed by the people who use their services (a consumer cooperative)
* organizations managed by the people who work there (worker cooperatives)
* multi-stakeholder or hybrid cooperatives that share ownership between different stakeholder groups. For example, care cooperatives where ownership is shared between both care-givers and receivers. Stakeholders might also include non-profits or investors.
* second- and third-tier cooperatives whose members are other cooperatives
* platform cooperatives that use a cooperatively owned and governed website, mobile app or a protocol to facilitate the sale of goods and services.

Research published by the Worldwatch Institute found that in 2012 approximately one billion people in 96 countries had become members of at least one cooperative. The turnover of the largest three hundred cooperatives in the world reached $2.2 trillion.

Cooperative businesses are typically more economically resilient than many other forms of enterprise, with twice the number of co-operatives (80%) surviving their first five years compared with other business ownership models (41%). Cooperatives frequently have social goals which they aim to accomplish by investing a proportion of trading profits back into their communities. As an example of this, in 2013, retail co-operatives in the UK invested 6.9% of their pre-tax profits in the communities in which they trade as compared with 2.4% for other rival supermarkets.

Since 2002 cooperatives and credit unions could be distinguished on the Internet by use of a .coop domain. Since 2014, following International Cooperative Alliance's introduction of the Cooperative Marque, ICA cooperatives and WOCCU credit unions can also be identified by a coop ethical consumerism label.

## Corporation

From Corporation

A **corporation** is an organization, usually a group of people or a company, authorized by the state to act as a single entity (legally a person) and recognized as such in law for certain purposes. Early incorporated entities were established by charter (i.e. by an *ad hoc* act granted by a monarch or passed by a parliament or legislature). Most jurisdictions now allow the creation of new corporations through registration.

Corporations come in many different types but are usually divided by the law of the jurisdiction where they are chartered into two kinds: by whether they can issue stock or not, or by whether they are formed to make a profit or not. Corporations can be divided by the number of owners: corporation aggregate or corporation sole. The subject of this article is a corporation aggregate. A corporation sole is a legal entity consisting of a single ("sole") incorporated office, occupied by a single ("sole") natural person.

Where local law distinguishes corporations by the ability to issue stock, corporations allowed to do so are referred to as "stock corporations", ownership of the corporation is through stock, and owners of stock are referred to as "stockholders" or "shareholders". Corporations not allowed to issue stock are referred to as "non-stock" corporations; those who are considered the owners of a non-stock corporation are persons (or other entities) who have obtained membership in the corporation and are referred to as a "member" of the corporation.

Corporations chartered in regions where they are distinguished by whether they are allowed to be for profit or not are referred to as "for profit" and "not-for-profit" corporations, respectively.

There is some overlap between stock/non-stock and for-profit/not-for-profit in that not-for-profit corporations are always non-stock as well. A for-profit corporation is almost always a stock corporation, but some for-profit corporations may choose to be non-stock. To simplify the explanation, whenever "Stockholder" or "shareholder" is used in the rest of this article to refer to a stock corporation, it is presumed to mean the same as "member" for a non-profit corporation or for a profit, non-stock corporation.

Registered corporations have legal personality and their shares are owned by shareholders whose liability is generally limited to their investment. Shareholders do not typically actively manage a corporation; shareholders instead elect or appoint a board of directors to control the corporation in a fiduciary capacity. In most circumstances, a shareholder may also serve as a director or officer of a corporation.

In American English, the word *corporation* is most often used to describe large business corporations. In British English and in the Commonwealth countries, the term *company* is more widely used to describe the same sort of entity while the word *corporation* encompasses all incorporated entities. In American English, the word *company* can include entities such as partnerships that would not be referred to as companies in British English as they are not a separate legal entity.

Late in the 19th century, a new form of company having the limited liability protections of a corporation, and the more favorable tax treatment of either a sole proprietorship or partnership was developed. While not a corporation, this new type of entity became very attractive as an alternative for corporations not needing to issue stock. In Germany, the organization was referred to as *Gesellschaft mit beschränkter Haftung* or *GmbH*. In the last quarter of the 20th Century this new form of non-corporate organization became available in the United States and other countries, and was known as the *limited liability company* or *LLC*. The GmbH and LLC forms of organization are technically not corporations (even though they have many of the same features).

## Holding company

From Holding company

A **holding company** is a company that owns other companies' outstanding stock. A holding company usually does not produce goods or services itself; rather, its purpose is to own shares of other companies to form a corporate group. Holding companies allow the reduction of risk for the owners and can allow the ownership and control of a number of different companies.

In the United States, 80% of stock, in voting and value, must be owned before tax consolidation benefits such as tax-free dividends can be claimed. That is, if Company A owns 80% or more of the stock of Company B, Company A will not pay taxes on dividends paid by Company B to its stockholders, as the payment of dividends from B to A is essentially transferring cash from one company to the other. Any other shareholders of Company B will pay the usual taxes on dividends, as they are legitimate and ordinary dividends to these shareholders.

Sometimes a company intended to be a pure holding company identifies itself as such by adding "Holding" or "Holdings" to its name.

## Joint-stock company

From Joint-stock company

A **joint-stock company** is a business entity in which shares of the company's stock can be bought and sold by shareholders. Each shareholder owns company stock in proportion, evidenced by their shares (certificates of ownership). Shareholders are able to transfer their shares to others without any effects to the continued existence of the company.

In modern-day corporate law, the existence of a joint-stock company is often synonymous with incorporation and limited liability . Therefore, joint-stock companies are commonly known as corporations or limited companies.

Some jurisdictions still provide the possibility of registering joint-stock companies without limited liability. In the United Kingdom and in other countries that have adopted its model of company law, they are known as unlimited companies. In the United States, they are known simply as joint-stock companies.

## Partnership

From Partnership

A **partnership** is an arrangement where parties, known as partners, agree to cooperate to advance their mutual interests. The partners in a partnership may be individuals, businesses, interest-based organizations, schools, governments or combinations. Organizations may partner to increase the likelihood of each achieving their mission and to amplify their reach. A partnership may result in issuing and holding equity or may be only governed by a contract.

### General partnership

From General partnership

A **general partnership**, the basic form of partnership under common law, is in most countries an association of persons or an unincorporated company with the following major features:

* Must be created by agreement, proof of existence and estoppel.
* Formed by two or more persons
* The owners are jointly and severally liable for any legal actions and debts the company may face, unless otherwise provided by law or in the agreement.

It is a partnership in which partners share equally in both responsibility and liability.

Partnerships have certain default characteristics relating to both (a) the relationship between the individual partners and (b) the relationship between the partnership and the outside world. The former can generally be overridden by express agreement between the partners. Whilst the latter is in general hardly varied, a careful draft would oust certain kinds of third party liability. A clause can contain that only the negligent partners can be sued and it is the wrongdoers that pay damages to victims only.

Subject to contrary agreement, the assets of the business are owned on behalf of all partners, and they are each personally liable, jointly and severally, for business debts, taxes or tortious liability. For example, if a partnership defaults on a payment to a creditor, the partners' personal assets are subject to attachment and liquidation to pay the creditor.

By default, profits are shared in accordance with the proportion of capital contribution amongst the partners. However, a partnership agreement will almost invariably expressly provide for the manner in which profits and losses are to be shared in accordance with that proportion. Liability, on the other hand, will not be shared equally unless express provisions indicate such possibility.

Each general partner is deemed the agent of the partnership. Therefore, if that partner is apparently carrying on partnership business, all general partners can be held out as partners for his dealings with third persons.

By default a partnership will terminate upon the death, disability, or even withdrawal of any one partner. However, most partnership agreements provide that in these types of events, (1) the share of the departed partner usually remains in the partnership or is given to an identified successor, and (2) the partnership will be dissolved. It is important to exclude duration on fixed term so that dissolution by notice and s.27 of the Partnership Act never apply.

By default, each general partner has an equal right to participate in the management and control of the business. Disagreements in the ordinary course of partnership business are decided by a majority of the partners, and disagreements of extraordinary matters and amendments to the partnership agreement require the consent of all partners. However, in a partnership of any size the partnership agreement will provide for certain electees to manage the partnership along the lines of a company board.

Unless otherwise provided in the partnership agreement, no one can become a member of the partnership without the consent of all partners, though a partner may assign his share of the profits and losses and right to receive distributions ("transferable interest"). A partner's judgment creditor may obtain an order charging the partner's "transferable interest" to satisfy a judgment.

### Limited partnership

From Limited partnership

A **limited partnership** (**LP**) is a form of partnership similar to a general partnership except that while a general partnership must have at least two general partners (GPs), a limited partnership must have at least one GP and at least one limited partner.

The GPs are, in all major respects, in the same legal position as partners in a conventional firm: they have management control, share the right to use partnership property, share the profits of the firm in predefined proportions, and have joint and several liability for the debts of the partnership.

As in a general partnership, the GPs have actual authority, as agents of the firm, to bind the partnership in contracts with third parties that are in the ordinary course of the partnership's business. As with a general partnership, "an act of a general partner which is not apparently for carrying on in the ordinary course the limited partnership's activities or activities of the kind carried on by the limited partnership binds the limited partnership only if the act was actually authorized by all the other partners."

Like shareholders in a corporation, limited partners have limited liability. This means that the limited partners have no management authority, and (unless they obligate themselves by a separate contract such as a guarantee) are not liable for the debts of the partnership. The limited partnership provides the limited partners a return on their investment (similar to a dividend), the nature and extent of which is usually defined in the partnership agreement. General Partners thus bear more economic risk than do limited partners, and in cases of financial loss, the GPs will be the ones which are personally liable.

Limited partners are subject to the same alter-ego piercing theories as corporate shareholders. However, it is more difficult to pierce the limited partnership veil because limited partnerships do not have many formalities to maintain. So long as the partnership and the members do not co-mingle funds, it would be difficult to pierce the veil.

Partnership interests (including the interests of limited partners) are afforded a significant level of protection through the charging order mechanism. The charging order limits the creditor of a debtor-partner or a debtor-member to the debtor’s share of distributions, without conferring on the creditor any voting or management rights.

When the partnership is being constituted, or the composition of the firm is changing, limited partnerships are generally required to file documents with the relevant state registration office. Limited partners must explicitly disclose their status when dealing with other parties, so that such parties are on notice that the individual negotiating with them carries limited liability. It is customary that the documentation and electronic materials issued to the public by the firm will carry a clear statement identifying the legal nature of the firm and listing the partners separately as general and limited. Hence, unlike the GPs, the limited partners do not have inherent agency authority to bind the firm unless they are subsequently *held out* as agents (and so create an agency by estoppel); or acts of ratification by the firm create ostensible authority.

Limited partnerships are distinct from limited liability partnerships, in which all partners have limited liability. In some jurisdictions, the limited liability of the limited partners is contingent on their not participating in management.

### Limited liability partnership

From Limited liability partnership

A **limited liability partnership** (**LLP**) is a partnership in which some or all partners (depending on the jurisdiction) have limited liabilities. It therefore can exhibit elements of partnerships and corporations. In an LLP, each partner is not responsible or liable for another partner's misconduct or negligence. This is an important difference from the traditional partnership under the UK Partnership Act 1890, in which each partner has joint and several liability. In an LLP, some or all partners have a form of limited liability similar to that of the shareholders of a corporation. Unlike corporate shareholders, the partners have the right to manage the business directly. In contrast, corporate shareholders must elect a board of directors under the laws of various state charters. The board organizes itself (also under the laws of the various state charters) and hires corporate officers who then have as "corporate" individuals the legal responsibility to manage the corporation in the corporation's best interest. An LLP also contains a different level of tax liability from that of a corporation.

Limited liability partnerships are distinct from limited partnerships in some countries, which may allow all LLP partners to have limited liability, while a limited partnership may require at least one unlimited partner and allow others to assume the role of a passive and limited liability investor. As a result, in these countries, the LLP is more suited for businesses in which all investors wish to take an active role in management.

In some countries, an LLP must have at least one person known as a "general partner", who has unlimited liability for the company.

There is considerable difference between LLPs as constituted in the U.S. and those introduced in the UK under the Limited Liability Partnerships Act 2000 and adopted elsewhere. The UK LLP is, despite its name, specifically legislated as a corporate body rather than as a partnership.

Limited Liability Partnerships, as well as all forms of limited liability companies, offer alternatives to traditional company and corporate structures. Limited liability can enable opportunities for new business growth that were formerly accessible only to those who had access to large amounts of capital or other resources.

Depending on jurisdiction and industry, there can be negative consequences for stakeholders associated with limited liability. For some large accountancy firms in the UK, reorganizing as LLPs and LLCs has relieved them of owing the "duty of care" to individuals and clients who are adversely affected by audit failures.

> Accountancy firm partners share the profits, but don’t have to suffer the consequences of negligence by firm or fellow partners. Not content with lobbying and financing political parties to get their way, accountancy firms have hired entire governments to advance their interests. PricewaterhouseCoopers and Ernst &Young hired the legislature of Jersey to enact a LLP Bill, which they themselves had drafted. They awarded themselves protection from lawsuits, with little public accountability... Accounting is central to all calculations about institutionalised abuses, tax and responsibility avoidance.
>
>

In the U.S., the Delaware Supreme Court Chief Justice Myron Steele suggested that limited liability entities should not be held to common law standards of fiduciary principles (as applied to all other company and corporate structures). Instead, he argued that courts should use contractual analysis of the partnership agreement when assessing cases of improper corporate governance. This directly led to elimination of the "independent fiduciary duty of good faith" in Delaware corporate law in 2006.

## Private limited company

From Private limited company

A **private limited company** is a type of business entity in "private" ownership used in many jurisdictions, in contrast to "public" ownership, with some differences from country to country. Examples include *LLC* in the US, *private company limited by shares* in the UK, *GmbH* in Germany or *spolecnost s rucením omezeným* in the Czech Republic.

## Sole proprietorship

From Sole proprietorship

A **sole proprietorship**, also known as the **sole trader**, **individual entrepreneurship** or **proprietorship**, is a type of enterprise that is owned and run by one person and in which there is no legal distinction between the owner and the business entity. A sole trader does not necessarily work 'alone'—it is possible for the sole trader to employ other people.

The sole trader receives all profits (subject to taxation specific to the business) and has unlimited responsibility for all losses and debts. Every asset of the business is owned by the proprietor and all debts of the business are the proprietor's. It is a "sole" proprietorship in contrast with partnerships (which have at least two owners).

A sole proprietor may use a trade name or business name other than their or its legal name. They may have to legally trademark their business name if it differs from their own legal name, the process varying depending upon country of residence.

Registration of a business name for a sole proprietor is generally uncomplicated unless it involves the selection of a name that is fictitious, or “assumed”. The business owner is required to register with the appropriate local authorities, who will determine that the name submitted is not duplicated by another business entity. Furthermore, the business owner must complete a form submitted to the governing authority to acquire title as a “DBA” or "doing business as”. The authority in some US states is the Secretary of State.

The license for a sole proprietary business entitles the owner to hire employees and enlist the services of independent consultants. Although an employee or consultant may be requested by the owner to complete a specific project or participate in the company's decision-making process, their contribution to the project or decision is considered a *recommendation* under the law. Under the legal doctrine *Respondeat superior* (Latin: "let the master answer"), the legal liability for any business decision arising from such a contribution remains upon the owner and cannot be renounced or apportioned.

This is transposed by the unlimited liability attached to a sole proprietary business. The owner carries the financial responsibility for all debts and/or losses suffered by the business, to the extent of using personal or other assets to discharge any outstanding liabilities. The owner is exclusively liable for all business activities conducted by the sole proprietorship and accordingly, entitled to full control and all earnings associated with it. The general aspect according to the general business law is that this type of business owner does not embody a “legal entity” Furthermore, any attempted and unreliable distinctions of the business do not change the classification under this title.