A business is simply defined as any type of entity that undertakes specific activities in order to earn a profit. The activities may include manufacturing, production, distribution, sales, marketing, etc. In addition, a business may be one person run by one corporation or several people who conduct the different aspects of the business jointly. A firm, for instance, is any entity that employs more than five workers and who is actively involved in the overall control and management of the firm. Similarly, a partnership is a legal entity that consists of more than two people who are related to each other by blood, marriage, common law or through some other means.
In much the same way, a corporation or a partnership is created by a legal document known as a partnership agreement. Partnerships are considered to be similar to corporations in that they are governed by general principles governing corporations. However, unlike corporations, partners have no direct control over the property, resources or profits of a partnership; rather, it is their investment decisions which determine a partner’s profits.
Examples of typical partnerships include joint stock companies, limited liability partnerships, indemnity benefit corporations and sole proprietorships. Examples of sole proprietorships include partnerships, sole proprietorship, and corporations. Many businesses incorporate as sole proprietorships to protect their assets in the event of bankruptcy. Similarly, sole proprietorships provide an advantage over other business types in that they require less management and administration than most partnerships.