Every year, an increasing number of people turn to self-employment. One business idea, no matter how original it may seem, is not enough here. It is equally important to determine the form of the legal entity. Only after having thoroughly studied the main differences between different types of legal entities, can you make the only right decision and register your business. What is the difference between several sorts of legal entities, and which is the best option? Commercial law services in Armenia will help you with every question you have.
Types of legal entities.
A legal entity as a subject of law, possessing its own property, with which it is responsible for all obligations, and participating in civil relations.
All legal entities fall into one of two categories:
- commercial;
- non-commercial.
The first category comprises activities with a profit motive. As for non-profit organizations, making a profit is not their main goal. Alternative business objectives could include social, cultural, or educational objectives.
Commercial legal entities.
Among the commercial entities are:
- Participants in general partnerships are responsible for all responsibilities including their personal property.
- Faith partnerships in which some participants are responsible for all of their personal property while others are only responsible for the property they provided to the organization.
- Participants in limited liability corporations (LLCs) are only liable for obligations incurred with the property invested in the company, and profit is paid in proportion to the number of shares distributed in the authorized capital.
- Companies with supplementary responsibility, in which participants are responsible for a portion of their personal property defined in the charter in addition to their shares in the authorized capital.
- Production cooperatives provide for the personal labor participation of members.
Non-commercial legal entities.
This category comprises non-profit organizations with a variety of missions. It could be:
- consumer cooperatives;
- various religious or public organizations;
- charitable foundations;
- non-profit institutions;
- numerous groups, associations, and unions that represent and safeguard their members’ interests
What’s the difference between a limited liability company (LLC) and a sole proprietorship?
The most common organizational forms for business are LLC and sole proprietorship. If an LLC implies the formation of a legal entity, then an individual entrepreneur is an individual who is registered with the tax authorities and has the right to conduct entrepreneurial activities.
As for such familiar abbreviations as PE and an entrepreneur without forming a legal entity, there is no need to choose between them, since they are equivalent to the compound abbreviated word sole proprietorship.
Who are self-employed citizens?
Self-employment is another option for providing services or conducting activities that create revenue for an individual. Self-employed citizens work directly with the customer, concluding a contract with him for the provision of services.
This is a one-person company that exists solely for the benefit of the owner. It is the most basic type of corporate structure. Apart from the owners, proprietorships do not exist. The business’s liabilities are the owner’s personal liabilities, and the business ceases to exist when the proprietor dies. The proprietor assumes the risks of the business to the extent that his or her assets, whether used in the firm or individually owned, are sufficient to cover such risks.
Professionals, service providers, and shopkeepers who are “in business for themselves” are examples of single proprietors.
