Describe the legal structures for entrepreneurial ventures.

Question

What will be an ideal response?

Answer 1

ANSWER: A sole proprietorship is a business that is owned and operated by one person. The enterprise has no existence apart from its owner. This individual has a right to all of the profits and bears all of the liability for the debts and obligations of the business. The individual also has unlimited liability, which means that his or her business and personal assets stand behind the operation. If the company cannot meet its financial obligations, the owner may be forced to sell the family car, house, and whatever assets would satisfy the creditors.

A partnership, as defined by the Revised Uniform Partnership Act (RUPA), is an association of two or more persons who act as co-owners of a business for profit. Each partner contributes money, property, labor, or skills, and each shares in the profits (as well as the losses) of the business. Although not specifically required, written articles of partnership are usually executed and are always recommended. This is because, unless otherwise agreed to in writing, the courts assume equal partnership—that is, equal sharing of profits, losses, assets, management, and other aspects of the business.

A corporation is "an artificial being, invisible, intangible, and existing only in contemplation of the law." As such, a corporation is a separate legal entity apart from the individuals who own it. A corporation is created by the authority of state laws and usually is formed when a transfer of money or property by prospective shareholders (owners) takes place in exchange for capital stock (ownership certificates) in the corporation. The procedures ordinarily required to form a corporation are (1) subscriptions for capital stock must be taken and a tentative organization created, and (2) approval must be obtained from the secretary of state in the state in which the corporation is to be formed