Business organizations

Ø 1) What business organizations do you know? Do you work in one of them, by any chance? What kind of business organization is it?

Ø 2) The writer uses the following words and word combinations in the text: proprietorship, partnership, limited liability partnership, accountant, lawyer, corporation, unlimited lifetime, stock, to own, a legal entity, responsible for, profits, shareholder. What do they mean?

Businesses are structured to meet different needs. One basic difference involves who is responsible for the business. Another involves how long the organization can stay in business. The following is a report about ways that businesses are organized under United States tax law.

The simplest form of business is called an individual proprietorship. The proprietor owns all the property of the business and is responsible for it. This means the proprietor receives all the profits. But this also means that the proprietor is responsible for all the debts of the business. Also, any legal action against an individual proprietorship is taken against the owner. The law recognizes no difference between the owner and the business.

Most small businesses in the United States are individual proprietorships. There are more than twelve-million of them. United States tax law has simpler reporting requirements for these kinds of businesses. One person may be able to complete all the tax documents required.

Another kind of business is the partnership. Two or more people go into business together. An agreement is usually needed to state how much of the partnership each person controls. They can end the partnership at any time.

But partnerships and individual proprietorships have a limited life. They exist only as long as the owners are alive. Some states permit what are called limited liability partnerships. These have full partners and limited partners. Limited partners may not share as much in the profits. But their responsibilities to the organization are also limited.

A partnership is often called a pass-through entity: money passes through it to the individual partners. The federal government does not tax partnerships. But the partners are taxed on the payments they receive.

Doctors, lawyers and accountants often form partnerships to share the profits and risks of doing businesses. A husband and wife can form a business partnership. The Census Bureau says there are more than one-million American partnerships. Partnerships and individual proprietorships are usually small business organizations. Next week, we discuss a bigger kind: the corporation.

These are the ways many small businesses are organized.

If to speak about the structure of big business, the most complex is the corporation. This kind of business organization is designed to have an unlimited lifetime. Investors in a corporation own stock. This is a share of the ownership. Investors can trade their shares or keep them as long as the company is in business. Investors may get paid dividends, a small amount of money for each share they own.

A corporation is a legal entity, a being separate from its owners. Shareholders are not responsible for the debts of the corporation. Shareholders can only lose the money they invest in stock. The corporation itself is responsible for its debts.

A board of directors controls the corporate policies. The directors appoint top company officers. The directors might or might not hold any shares in the corporation.

United States tax law recognizes two general kinds of corporations. The first is known as the corporation. Corporations were the only kind for many years. Most pay taxes on their profits. Shareholders also pay taxes on dividends they receive. Some people call this “double taxation.”

Ø 3) Which of the summaries renders the content the most adequately?

a) The text is about the ways that businesses are organized. There are different kinds of businesses, for example, an individual proprietorship and a partnership. The former has simple reporting requirements for taxes, while partnerships are not taxed by the government at all. Instead the partners are taxed on the payments they receive. These are the small businesses.

The most complex business is the corporation. Investors in a corporation own stock and are paid dividends. Shareholders are not responsible for the debts of the corporation. A board of directors controls the corporate policies. The corporations pay taxes on their profits.

b) This text deals with different types of business organizations, such as individual proprietorships, partnerships and corporations. The first two comprise about 13 million business organizations. Corporations belong to big business. Proprietorships have simple reporting requirements for taxes. Partnerships are not taxed, instead, the partners are taxed on payments they receive. As for corporations, most of them are taxed.