BUSINESS
LAW: FORMS
OF BUSINESS ORGANIZATIONS:
SOLE PROPRIETORSHIP
Businesses take many forms. My
business, a law practice is a Sole Proprietorship. This means I alone
own it and receive the benefits associated with this ownership and I alone
assume the risks and responsibilities associated with the business.
This may not be the right choice
for everyone.
PARTNERSHIP
Another business form is a Partnership
created by two or more persons who, for business purposes, engage in an enterprise
for profit and in turn share the risks and benefits of that enterprise.
Unless there is an agreement between
the partners, the risks are joint and several, which means each partner is
responsible for all of the debts and liabilities of the partnership and share
equally with the other partners the benefits of the partnership.
LIMITED PARTNERSHIP
To reduce the risk associated with
a partnership, a Limited Partnership may be formed. This is a business
form in which the general partner is fully responsible for the acts of the
partnership enterprise and the limited partners, provided they take no part
in the management of the partnership, only risk their partnership capital
and they share in the benefits derived from the enterprise. The partners in
either case may be individuals and corporations.
CORPORATION
Corporations may be considered
the most sophisticated of the business forms since it entails the creation
of an entity separate from its owners who are only the shareholders. The corporation
assumes the liabilities and risks associated with the corporation’s activities
and not the shareholders.
The shareholders elect the directors.
Directors appoint the officers and declare the dividends, whereby the corporation’s
profits are distributed to the shareholders. Depending on the nature of the
business, tax implications, the relationships between the participants, the
anticipated clients, the requirements of persons providing financing or capital,
the form the business may take may be hybrid combination of the various forms
reviewed, with sophisticated terms in the governing agreements and constating
documentation setting out the various rights, remedies and responsibilities
of the parties.
Each of these forms of enterprise
are governed by legislation and regulation, and require for the most part
some form of governmental registration.
Should you have any particular
questions as to what form of enterprise may be right for you, please feel
free to make your enquiry through the Contact link.
Alternatively, I you may wish to
proceed with a business registration or incorporation by following the On-Line
Services link.
IN TRUST
A Trust occurs when some
one holds something on behalf of another. This may be pursuant to a power
of attorney, a will, a trust deed or the simple usage of the phrase, “in trust”.
The person acting as the trustee is personally responsible to others with
whom the trustee contracts with unless the liability is expressly limited.
The usage of the phrase, “in trust”
does not limit the trustee’s liability in any fashion. The trustee must account
to the beneficiary and must act in the best interest of the beneficiary.
Trusts may be used for sophisticated
estate planning to shelter assets, split income, tax planning, provide for
spouses and children, or protect against possible claims by former spouses
and children.
CONTRACTS
A Contract is an agreement
between two or more persons where one party agrees to do something in exchange
for something received by another party.
I have frequently used the expression,
“a verbal agreement may be as good as the paper it is written on”. Although
a verbal agreement is binding, it’s a matter of proof as to what the agreement
actually is.
At a time the agreement is in dispute
memories may be hazy or selective. Certain agreements must be in writing,
such as a guarantee. Agreements should be in writing and should clearly set
out the intentions of the parties to the agreement with a significant degree
of certainty.
Life however doesn’t work that
way and all to frequently, agreements are not clear, fail to address the intentions
of the parties, disputes arise regarding the performance and terms of the
agreement and otherwise give rise to those events which need lawyers.
A good agreement which will reflect
the intention of the parties, survive disputes regarding interpretation and
performance takes time, consideration and experience to prepare and negotiate.
It is time and effort well worth expending.
These
commentaries are not legal advice. To consult
with us, contact [email protected]