2004-2-5
This is Bob Doughty with the VOA Special English Economics
Report.
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. Today we
begin a report about ways that businesses are organized under United
States tax law.
The simplest form of business is called an individual
proprietorship. The word proprietor comes from French and Latin
words for property owner. 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. The Census Bureau says there are more the
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 business. 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.
This VOA Special English Economics Report was written by Mario
Ritter. This is Bob Doughty.