The Wonderful World Of Business

No matter how a company is structured, when it comes to the private sector, the number one goal is to be profitable. On the surface this may sound overly harsh and callous. Remember, though, there can be a profoundly negative ripple effect when companies are in the red.

If a company is publicly held (more on this later), and is losing money, then there is a real chance that its stock price will suffer. As such, all investors can take a hit to their net worth. If these investors are now worth less, then they might spend less, which in turn may adversely affect other sectors of the economy. Moreover, and regardless if it is public or private, a company in the red might have to rethink its personnel requirements. That is, they could lay off workers, freeze future hiring, or both.

So with the supposition that profitability is the objective for all business entities (excluding not-for-profit organizations) as a backdrop, let’s start with the most common type of business entity which is the sole proprietorship. It is a company owned by one individual. This individual may be the only employee, or he or she may have employees. The proprietor could work from home or have a storefront. What they definitely have, though, is unlimited liability for any debts that the company incurs.

Bring together two or more people for private ownership of a company, and you have a partnership. Like the sole proprietor, each partner has unlimited debt liability. However, there is a way to mitigate financial exposure for the partners. The firm can be set up as a limited liability partnership. This means that no partner is on the hook for the misdeeds or negligence of another.

The most democratic form of business ownership is the cooperative. In the most general sense, it is a legal entity with limited liability in which its members, as opposed to shareholders, have the controlling authority. An example of a “co-op” is an organization managed by its workers.

A publicly held corporation is one that offers its stock for purchase; one that does not issue stock for public sale is a private corporation. It can be either a for-profit or a not-for-profit organization. Both have limited liability and are, legally speaking, non-human entities. Management and employees are not liable for debts. An exception to this can be criminal malfeasance committed on the part of an employee.