Corporations and Other Business Organizations
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Description
This chapter will provide a brief overview of the forms of business association in the United States, including a discussion of the law that govern their structure and the procedures to be followed for their organization. Detailed discussion will be limited to selected topics involving organization, operation, and reorganization of business corporations. Business enterprises in the United States are organized principally in one of four forms: the proprietorship; the general partnership; the limited partnership; and the corporation. A fifth form, used originally in the nineteenth century, which may become increasingly important in the forthcoming years, is the limited liability company. The laws that govern establishment of each of these enterprises and the relationships among their participants are, with two important exceptions, state laws. The choice of the form of the organization, as well as the choice of the state law under which it will be established, is made by the original organizers. The largest business enterprises in the United States are, with few exceptions, corporations, most-though not all-of which are owned by large numbers of stockholders. However, for economic and organizational reasons, the proprietorship and partnership forms (as well as the limited liability company) remain very important. Probably the most significant reason for the continued use of partnerships is a particular feature of United States tax law: while the distributed income (dividends) of corporations is taxed twice (once at the corporate level, and once again at the stockholder level), the distributed income of partnerships is taxed only once. Avoidance of this multiple tax burden is the principal reason why some forms of business, such as real estate enterprises (e.g. office buildings, rental apartment complexes, and shopping centers), motion picture production ventures, and natural resource exploration projects, are widely organized as limited partnerships. Professional service organizations, including doctors, dentists, accountants, and lawyers are also often organized as partnerships, although a substantial number of professionals have established ‘professional corporations’ as a means of obtaining certain tax benefits and providing a degree of limitation of liability. Start-up companies are often formed as proprietorships or general partnerships, and while many remain in those forms, those that become sizeable are often eventually incorporated. The various forms of business enterprise may be used as components of a larger structure, in which a corporation, partnership, or limited liability company may be a parent, a subsidiary, or an intermediate holding company.
Source Publication
Fundamentals of American Law
Source Editors/Authors
Alan B. Morrison
Publication Date
1996
Recommended Citation
Siegel, Stanley, "Corporations and Other Business Organizations" (1996). Faculty Chapters. 1257.
https://gretchen.law.nyu.edu/fac-chapt/1257
