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The Different Types of Corporations and Businesses

by gbaf mag
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The term “corporation” has two historic and metaphorical meanings in English: it can mean either a privately owned business or an institution that exercises corporate authority. In America, the first meaning of the word is “a company composed of and operating under a charter.” In its second meaning, the term can mean the official body or nerve center of any nation-empire or association. The most famous example of the latter sense in American business history is the U.S. House of Representatives.

Of course, the House of Representatives does not operate in Europe, nor does Europe have a representative in the House. But the term corporate refers to all kinds of organizations that are formally established as legal bodies, with the authority to undertake activities on behalf of their investors or owners. And businesses that do not formally own the entity that gives them the name are said to be “privately owned businesses.” There is something peculiar about the way that Europeans use the term “private ownership” when discussing capitalism. In the United States, most people simply call businesses corporations.

Why do Europeans tend to use the word “capitalism” when talking about business? The best explanation is that the word “capitalism” describes a wide range of attitudes about how people own and control their businesses and financial resources. There are both personal assets and corporate assets. People differ over what belongs to whom and how those assets are used.

Private-owned businesses have lower levels of total capitalization than medium-sized enterprises. In addition, small businesses have much higher rates of business failure than do large corporations. And unlike large businesses, medium-sized enterprises have very low levels of turnover – which suggests that they are rarely abandoned by existing customers. Also, medium-sized enterprises have access to vast institutional capital, which enables them to invest in new technology, products, and infrastructure, and to finance their growth.

Large corporations buy more tangible assets than do small businesses. They purchase plant and equipment, building sites, and property, as well as intellectual property and new products. Medium-sized enterprises often have warehouses and sales outlets. And large businesses often hire extensive fleets of trucks and drivers for their supply chain.

A large corporation also has an extensive network of distribution channels. Often, a manufacturing business buys products in one location and delivers those products to various outlets. A retailing business, on the other hand, distributes its products by truck to stores. Many businesses, including some of the largest ones, are global. A manufacturing business buys raw materials from suppliers in the United States and transports those materials to the factories in China, where the finished products are manufactured. And even though a manufacturing business may employ hundreds or thousands of people, it does not have the same kind of overhead as a retailing or merchandising business.

One of the most common examples of basic forms of business ownership is a sole proprietorship. A sole proprietor owns and manages the business; there is no common ownership or shares, and there is only one owner who makes all of the decisions. Examples of sole proprietorships include sole partnerships, partnership franchises, limited liability partnerships, and corporations. Other common examples of sole proprietor businesses are partnerships, limited liability companies, corporations, and limited liability partnerships.

Another common example of one of the basic forms of business ownership is a partnership. A partnership occurs when two or more people share in the ownership of a business. Partnerships can be simple or complex. A simple partnership occurs when two or more people form a corporation, form a limited liability company, or invest together in a real estate property or other asset. Other common examples of this type of ownership are proprietorship, partnership, limited liability corporation, partnership brokerage, and brokerage partnership.

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