General partnership and corporation are two forms of doing business. There are similarities and differences between them. Some consider a general partnership to be a special case of a corporation.
What is a general partnership
A general partnership (PT) is an association of people for the purpose of doing business with the creation of a legal entity. In this case, members of the PT conclude the Memorandum of Association. PT participants contribute in the form of money or any property (buildings, equipment, land, etc., patents, licenses, labor). PT members are liable to creditors with all their property, therefore they can only be in one full partnership.
PT participants have the right to receive income in proportion to the invested capital. They participate in the management of PT affairs. Each member of the PT has one vote, regardless of his contribution. Usually decisions must be taken unanimously. All participants participate in the distribution of profits. They can also leave the partnership at any time. General partnerships have a number of advantages. They can always attract new comrades by increasing capital. Lenders trust them, knowing that debts will be paid off anyway. But if the activity went unsuccessfully, the members of the partnership may lose all their property.
What is a corporation
A corporation is a form of business in which a company is owned by shareholders. Shareholders are not liable for the debts of the corporation itself. This means that if the company goes bankrupt, the shareholders will only lose the money they paid for the shares, but no one will take the property away from them. The corporation is governed by a board of directors elected by the shareholders themselves. And the day-to-day management of business is in the hands of the president of the company. A corporation can increase its capital by issuing shares.
Comparative analysis of two forms of business
To establish whether a PT is a corporation, it is necessary to compare these two forms of business organization. Both of them are associations registered as legal entities. But a corporation is a pool of money, and a PT is another capital. Both forms can attract new members. At the same time, a general partnership can turn into a limited partnership if it issues its own shares. Management in PTs and corporations is very different. In a corporation, management is separate from shareholders. Manages the board of directors, to which shareholders have entrusted their votes. And in the PT, each member has a full voice in resolving issues.
There can be millions of shareholders in corporations. And the number of PT members is limited. Both forms are created for entrepreneurial activity, for profit. Profit in both forms is distributed according to the contribution of the participants to the common cause. But there is double taxation for corporations. First, the corporation itself pays taxes on profits. And then the shareholders who receive dividends pay taxes. And the main difference is the responsibility of the business participants. Shareholders risk only their shares, and general partners in the event of bankruptcy of the partnership may lose all their property.
