Opening a Business as a General Partnership or a Corporation

Subject: Company Structure
Pages: 2
Words: 337
Reading time:
2 min

Corporations and partnerships are bodies formed with the purpose of performing certain businesses. However, they both have diverse structures that differentiate them. A partnership comes into existence when two or more individuals join in doing business with the aim of making profits. On the other hand, a corporation is a separate authorized body that is owned by shareholders. It contains legal rights and accountabilities. The ability to raise capital, transfer ownership, and separation of ownership and management are the key factors that need to be considered in starting a type of business.

The corporation is the easiest way of starting a business; it paves the way for the inclusion of many shareholders. Also, it does not cease to exist when shareholders leave by selling or transferring their shares. Unlike a corporation, the partnership must be terminated when the parties involved differ by 50%. Raising capital in a partnership is also involving; it requires individuals to raise capital by themselves. Thus, it is crucial for Rebecca and Jen to operate their business as a general partnership because they rely on their savings and loans from the bank.

At some point, parties involved in business may need to transfer ownership of their business to other people. In a corporation, the addition of new members and transfer of ownership is very easy. By contrast, the transfer of ownership by a partnership poses challenges that may lead to its termination. Even though it is hard to transfer ownership in a partnership, Rebecca and Jen can transfer their business ownership by signing a partnership agreement. In corporations, owners are different from company management. This separation plays a crucial role in avoiding the chances of bad management. Unlike corporations, partnerships are managed by the partners involved. Partners are also responsible for the challenges their business faces. Thus, Rebecca and Jen can get involved in day to day running of their business in order to enhance its success.