Unincorporated Businesses

• Author: Tina Kamakaris/Jane Kamakaris/Louis Kamakaris
• Pages: 437-450

437

Chapter 24 Unincorporated Businesses

CHAPTER 24

is chapter covers the various types of unincorporated businesses and how they are

created and operated.

SOLE PROPRIETORSHIPS

A sole proprietorship is a business that one person owns and operates. e sole proprietorship

is a form of ownership used commonly in the retail and service trades. If you set up shop

selling dreams and run it yourself responsibly for prot, you have created a business known as

a sole proprietorship. Almost anyone can start a business in the form of a sole proprietorship

doing anything that is legal. e sole proprietor usually owns and manages the business

activities and is legally responsible for all its debts and other legal obligations. e sole

proprietor may employ others in his or her business. A sole proprietorship is not regulated

by special laws and requires little in the way of legal assistance in its formation.

PARTNERSHIPS

A partnership, commonly referred to as a rm, is a business that two or more people own

and operate. e Partnerships Act provides various rules for the partnership structure. For

example, the basic criteria for forming partnerships are: there must be a business. Business

means “every trade, occupation or profession.” Next, the object of the business activity must

be prot. If the object of the activity is social, cultural, religious, charitable, etc., the activity

is not a partnership, and it is not a business. Finally, there must be a written or a verbal

partnership agreement to carry on business collectively and to share in the prots. Generally,

there are general partnerships, limited partnerships, and limited liability partnerships.

General partnerships General partnerships consist of two or more partners who may

be individuals, unincorporated businesses, or corporations. Most partnerships are general

partnerships in which each partner has a right to participate in the management of the

partnership business, each partner is responsible for all debts of the partnership, regardless

of his or her share of investment or portion of ownership in the partnership, and each

partner is entitled to a share of any prot on the basis agreed upon among the partners. e

Partnerships Act and a contract, if any, entered into among the partners determine the exact

legal relationship among the partners. is contract is known as a partnership agreement.

Although a partnership agreement is not needed in the legal formation of a partnership, a

partnership agreement is almost always necessary in order that the partnership will function

as the partners intend.

UNINCORPORATED

BUSINESSES

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