3.1 Business Structures and Legal Terms

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Articles of Incorporation

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Documents filed with a governmental body to legally establish a corporation as a recognized entity under state law.

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Benefit Corporation (B Corp)

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A corporation that explicitly considers public benefit in its decisions rather than only maximizing shareholder value.

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C Corporation (C Corp)

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A corporation that can sell unlimited shares of its stock to the general public, is heavily regulated by the government, and reports its financial information to the public.

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Corporation

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A legal entity that is separate from its owners and controlled by a board of directors; the entity has most of the same rights and responsibilities that individuals possess but offers limited liability.

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General Partnership

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A business structure where all the partners have decision-making and management power, and have unlimited liability, meaning they can lose more than they invested.

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Liability

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The legal responsibility of an individual (or entity) for actions, debts, and obligations.

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Limited Liability

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The liability restricts an individual’s potential loss to the total amount of their investment in a company.

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Limited Liability Company

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A hybrid business structure, where it combines the operational characteristics of a sole proprietorship or partnership while limiting the liability of the investors to the amount they invested.

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Limited Liability Partnership

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A hybrid business structure where all the partners have decision-making and management power, have limited liability, and can’t be held responsible for any of their other partner’s actions.

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Limited Partnership

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A business structure where one or more of the partners are not active, have no decision-making power, and are limited in their liability to the amount they invested.