The word business literally means to conduct business. In general, a business is a legal entity where individuals work together as one. A business can make a profit out of the commodities and services that it provides. Hence, a business is a permanent entity, in which money is made or lost.
A business consists of different types of entities such as a corporation, partnership, proprietorship or LLC. A company is the general term used in business while a partnership is a legally recognized relationship of two or more people. An LLC is a limited liability company, which has the most basic feature of a partnership. An LLC will not have the same advantages and privileges as a corporation as it is not a partnership.
LLCs are generally registered as separate legal entities from the partners as they are created to be treated as such. They enjoy all the privileges and benefits that a partnership enjoys as set out under the laws of taxation. However, in case of an insolvency, dissolution of the partnership, the owners automatically become individually liable for the debts of the partnership. This is why a LLC is preferable to any other form of business entity.
An LLC is not considered as being totally separate legal entity from corporations. Although they are formally established as separate legal entities, they are indeed dependent upon corporate assets for their existence. It is also true that they cannot conduct business on their own as they are financially attached to the corporations through the use of stock ownership. Even if they have access to capital, it does not mean that they can expand their business with relative ease. In most cases, the need to expand the business must come from outside sources.
In most cases, the incorporation of a limited liability company is essential when one wants to establish a business but is unable to do so through incorporation alone. Limited liability companies are extremely beneficial when it comes to ensuring that your finances are well-managed and that your debts are kept well within limits. For those who own small businesses, incorporating a corporation is very difficult, if not almost impossible. This is because corporations have special features such as limited liability which help to keep personal debts separate from business debts. As we said earlier, LLCs enjoy all the benefits that corporations have but are formally established as separate legal entities from their partners. Moreover, they enjoy all the special features that individual companies have, such as freedom of speech.
When it comes to the issue of establishing businesses, LLCs are much preferred over sole proprietorships, partnerships and corporations. As was already explained, a sole proprietor cannot personally control or manage his business. On the other hand, a sole proprietor can always run the business either alone or with the help of another partner. A partnership, on the other hand, functions like a company, in that it is run by a board of directors. However, the business does not enjoy all the benefits that a corporation enjoys.