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Business Organization and Securities Regulation: General Partnerships, Corporations, and
Limited Liability Companies
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General Partnerships, Corporations, and Limited Liability Companies
Some of the most renowned business structures are general partnerships, corporations,
and limited liability companies. Each of the structures differs significantly in relation to the
management structure, formation costs, capital, and transferability of ownership. General
partnerships are made up of two or more people who come together to make profits. The partners
enter into a contract, and share profits and losses (FDIC, 2017). One of the main advantages of
general partnerships is that they require minimal formalities as there are no written contracts
required for the business to be considered a partnership. Additionally, general partnerships are
not required to pay business income taxes. Instead, partners file their personal tax returns to
report their share of either losses or profits made by the partnership. A major disadvantage of
general partnerships is that partners have unlimited liability and are required to jointly contribute
to the obligations of the business. Another disadvantage is that the duration of existence should
not exceed 50 years (FDIC, 2017). The capital structure depends on the share of partner
contributions (equity or cash), which can limit the amount of funds available to run the business.
Partnerships also have strict transferability of ownership. Lastly, general partnerships are faced
with managerial issues due to arising conflicts between the partners.
Corporations are legal entities separate from the shareholders. Some of the main features
of corporations include: they can enter into a formal contract, they can report and file annual
profits, they are held liable …
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