Main Article on Corporate Law and Liability

A business is defined as any company or unincorporated entity actively engaged in commercial, organizational, or financial activities for profit. Companies can be either for-profit or non-profitable organizations that conduct business to meet a specific social cause or further a specific social goal. Nearly every country in the world has laws regulating the activities of businesses. In some instances, these laws regulate the amount of workers compensation a company’s employees receive. In other instances, these laws attempt to protect the environment and protect human health and safety. Regardless of their intended purpose, all businesses must follow applicable laws to both promote their own interests and ensure the productivity and profitability of their ventures.

Each type of business structure has different advantages and disadvantages. One of the key advantages to having a limited liability company (LLC) or a partnership (PLC) is the ability to control the flow of income through the business. With a limited liability company, debts owed to another party are typically limited to the assets of the owner or owners of the business entity. In contrast, with a PLC, all share holders are liable for the debts of the business. In this instance, the business may be taxed heavily based on the value of the assets of the business entity in comparison to its liabilities.

Business debts are typically determined by assessing each share holder’s ability and knowledge to pay the debt. If a business has a large amount of retained earnings with little or no tangible assets, then the shareholders may not have sufficient funds to service the debt. Business owners can use either retained earnings or preferred stock as methods of raising funds. Often, the company’s preferred stock is purchased at a discounted rate from a private investor; however, this must be done with careful due diligence as the profits earned through the sale of preferred stock can often be less than the total existing value of the shares.

A corporation is generally created by filing Articles of Organization with the state in which the corporation is registered. The Articles of Organization must describe each member’s personal liability for the corporation’s debts. The Articles also set out each company’s duly authorized share holders and directors. A corporation will then issue stock into either an open-outcry or preferred stock account. Each shareholder will have an ownership interest in the corporation. As with a limited liability company, the corporations shareholders are individually responsible for the debts of the corporation.

Income that a corporation earns above its investment in the resources it uses is referred to its “income” and generally becomes taxed at the same rate as the income of the shareholder(s). However, dividends paid to shareholders are excluded from being taxable until the tax is paid on them. This double taxation can result in substantial profits being lost over time due to double taxation. Double taxation is extremely common with most businesses and should be avoided whenever possible.

Sometimes small businesses use their profits to buy additional shares in other companies. In this case the main article is not written about because the purpose is to write about the strategic management principles to be used when buying shares. When a business owner is planning to buy additional shares the strategic management principle is often used. Here is the main article.

As mentioned above, corporations are classified as partnerships. Partnerships are different from corporations because they do not have individual assets. In order to use Article 7 in a lawsuit, an entity must be a partnership in accordance with Texas commercial law. An entity does not have to be classified as a partnership for this to apply.

Every partnership must be separately created in Texas and treated as a corporation. This means that any corporation that owns stock in another corporation must be treated as a partnership for all purposes. Any company that owns stock in any entity is required to register that company separately and pay corporate taxes on its own profits. It is important to understand that all of these requirements apply whether a company is publicly held or is privately owned.