A look at five different types of corporate ownership

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Once your business has grown from a simple start-up to a successful enterprise, there’s a lot of brag about it. The foundation of this success is only on one factor and that’s; selecting the appropriate business structure. Whereas sole proprietorship and partnership are renowned corporate structures, others would prefer commencing operations as a limited liability company (LLC), private or s-corporation to ensure their personal assets are safe from complex legal actions taken against them.

Ownership of a business depends on its needs and long-term goals. Multinationals and other big-time organisations are designed considering the longevity and sufficient finance; even if primary goal is simply to support a family. The legal form you choose would impact on overall production, the type of paperwork and taxes. Here, we’ll look at different business ownerships and their relevant aspects. Let’s start with the common ones!

  1. Sole proprietorship

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This particular type of business is owned and operated by a single individual as the title says it all. It’s among the most common form of corporation around the world and the biggest advantage is flexibility it offers such as ease of formation, minimum capital investment and all the profit you can enjoy. All that’s required is official announcement of stepping into the business world and make requests for essential licenses and permits.

Owner is the heart and soul therefore he’s free to take all the decisions, introduce or renounce standards for betterment still, this freewill shouldn’t violate state and security norms. Government intervention is least whereas you can enjoy all the privacy.

  1. Partnership

When two or more individuals own and manage a firm, this is referred to as partnership. There’re two subcategories linked to this particular type of ownership that is; general and limited association. In general partnership, all owners have unlimited liability whereas with limited, obligation or liability is on a particular owner’s investment. Most countries ask to furnish a legal document known as “Articles of Partnership” that defines all about a partner’s investment, responsibility and their role in a company.

Easy management, combined with expertise of all associates is the biggest advantage that may take a business at a new height of success. Partners’ strengths, greater availability of financing and minimum government regulations helps in taking greater decisions, beneficial for the company’s future.

  1. Private Corporation

A business whose legal structure is created by the country of origin while assets and liabilities are separate from its owners is termed as a Private Corporation. Public organisations are also there whose ownership and assets are traded on stock exchange however, most small businesses usually initiate as private. It’s owned by a small group who’re directly involved in management and decision making.

“Articles of Incorporation” is a legal document required to form a private business and must be submitted to government authorities where it’ll commence operations. Basic advantage is limited liability allowing an owner to lose only the initially invested amount when there’s a slump. Greater funding resources, easy ownership transfer and unlimited lifespan are some other benefits.

  • Ownership Appealing to Entrepreneurs
  1. S-Corporation

This ownership is suitable for both private corporations and partnerships. Owners have limited liability, greater reliability especially when it comes to obtain finances and the best of all; there isn’t any double taxation as entire profit is distributed equally among the owners. Still, there’re some restrictions on type of shareholders and their numbers but the advantages surpass other factors.

  1. Limited Liability Company (LLC)

Yet another type of common and popular ownership around the world is LLC (Limited Liability Company). It’s taxed just as sole proprietor or partnership (depends on number of members). An “Articles of Organisation” is submitted to the state government where the company operates.

Conclusion : 

As you proceed with company formation in the UAE or anywhere around the world, be clear on the type of ownership as it directly impacts on overall yield and processes.