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Accounting Notes

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Accounting I 280

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State the four most common forms of business enterprises and briefly describe them. Answer: 1. Sole Proprietorship is an unincorporated business owned by one person. 2. Partnership is an unincorporated business owned by two or more persons. 3. Corporation is a type of business organization recognized under the law as an entity separate from its owners. It provides certain legal protection for the owners against lawsuits brought against the company. They are allowed to do many of the same things any person would be able to do: own land and other property; enter into contracts; sue and be sued in court; pay taxes; conduct business, and so forth. 4. Limited Liability Company (LLC) is a type of business organization recognized under the law as an entity separate from its owners. It has features of both a Corporation and Partnership. It provides certain legal protection for the owners against lawsuits brought against the company. LLCs provide certain tax benefits to the company and the owners.
The Sole Proprietorship and Partnership forms are often considered "natural" business forms, because they can be created with only the actions of the owners. The mere conduct of business by an individual creates a Sole Proprietorship automatically. Two or more individuals conducing business together automatically creates a Partnership, although that may not have been the intention of the people originally.
Corporations and LLCs are "legal" business forms. They are created by an act of law, and the owners must register these entities with the Secretary of State (or other designated government office in foreign countries). his tutorial is prepared for my students enrolled in Accounting Principles classes I teach for Columbia College, in the Extended Studies and Online Education divisions. It is free for anyone to use for

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