Business Organizations

(Includes Sole Proprietorship, Partnership, and Corporation)

Important Definitions

Limited Liability

is where a person's financial liability is limited to a fixed sum, most commonly the value of a person's investment in a company or partnership. If a company with limited liability is sued, then the plaintiffs are suing the company, not its owners or investors.

Unlimited Liability

refers to the legal obligations general partners and sole proprietors because they are liable for all business debts if the business can't pay its liabilities.


a type of security that signifies ownership in a corporation and represents a claim on part of the corporation's assets and earnings.


a distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders.

Board of Directors

is a body of elected or appointed members who jointly oversee the activities of a company or organization.

Which Business Type Is The Most Common?

Sole Proprietorship