Company Types

Companies come in many different forms. There are three basic types of companies according to legal ownership and organization.

A sole proprietorship is legally owned by one individual. Any profit or loss belongs to that person. The individual may decide to have a key role in the organization or may choose others to manage all or part of the business.

A partnership is like a proprietorship except it is legally owned by two or more people. Partners may own varying percentages of the business. Profits and losses are shared accordingly. A silent partner is an individual who puts up money to fund a company or part of a company, but is not active in its daily management.

A corporation is a legal entity itself, and it may be privately or publicly owned. Ownership is divided into shares, and various people own different numbers of shares. When a corporation is publicly held, at least some of the shares can be purchased by whoever wants to buy them. Corporations usually have a president, a Chief Executive Officer (CEO), and perhaps several vice presidents. These executives may or may not be major stockholders. The CEO and president report to a board of directors.

An LLC, or Limited Liability Company, has many of the advantages of incorporation, but not the same status. It is owned by one or more members, who are very directly tied financially to the LLC.

Companies often begin as sole proprietorships or partnerships and then the owners decide to form a corporation or become an LLC. Many corporations begin as privately held, and later the shareholders may decide to "go public," or become publicly owned. These changes may or may not significantly affect employees. They do not necessarily reflect the amount of success the business is enjoying.

Do not make a career decision based on whether a company is a proprietorship, partnership, privately held corporation, or publicly held corporation. Examine the opportunity for you.