Kinds of Business Ownership Exist
The specific form of business ownership has significant implications for accounting purposes and so it is helpful to be clear about the major kinds of ownership that can take place.
There are mainly three arrangements:
Partnership
A partnership exists in which at least two individuals continue a business together along with the purpose of making a profit. Partnerships contain much in common with sole-proprietor businesses. They are generally fairly small in size (even though some, like partnerships of accountants and solicitors, can be large). Partnerships are also simple to set up because no formal procedures are needed (and it is not even essential to have a written agreement among the partners). The partners could agree whatever arrangements suit them regarding to the financial and management aspects of the business. Likewise, the partnership can be restructured or dissolved through agreement among the partners. Partnerships are not known in law like separate entities and so contracts along with third parties must be entered into in the name of individual partners. The partners of a business generally have limitless liability.
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