The impact of litigation can be reduced if the partners have a well-planned partnership agreement defining the rights and responsibilities of all. The agreement could contain the following information: an individual company does not have a separation between the entity and its owner, which differentiates it from capital and limited partnerships. An essential element of an individual business as part of a business plan is the establishment of an intrinsic guideline for the measures to be implemented for a business in order to generate growth. The name of the company and the products are critical aspects when setting up an individual business and should be protected after they are selected. In the case of some legalization of the trademark, information on trademark protection is available from the U.S. Patent and Trademark Office. An individual business is formed when someone enters the business alone and does not participate in it. The only obligations are local registrations and licenses. Depending on Entrepreneur.com, partnerships can be formed by an oral contract if two or more people decide to go to business. In addition, a partnership must be registered as a new business with the local government. However, most partnerships have a partnership agreement developed by partners that outlines business practices and responsibilities.
Partnerships usually end when a partner wants to leave or die. On that date, all legal obligations and obligations must be fulfilled. Most small businesses start as individual businesses, but evolve over time and in different legal structures. In 2005, Kate Schade founded kate`s Real Food as an individual entrepreneur. The company creates and distributes energy bars and started as a local supplier in Schade`s hometown, Victor, Idaho. The individual company sold its energy bars in local agricultural markets, then expanded to sell online and on a few accounts in Jackson, Idaho. This is implemented by the unlimited liability of a single company. The owner assumes financial responsibility for all debts and/or losses incurred by the entity to the extent that personal or other assets are used to honour outstanding debts.
The owner is solely responsible for all the activities of the individual business and, therefore, he is entitled to full control and all related revenues. The general aspect of commercial law is that this type of entrepreneur is not a „legal person.“ In addition, the company`s distinctions have not been changed and are unreliable to change the classification under this title. An individual business is easy to form. In some jurisdictions, no formal filing of documents or events is required. This is a status that automatically arises from the owner`s business activity when buying and selling goods or services. In other jurisdictions, an individual company is created by registering the company`s name with the relevant authority. Similarly, it is easy to dissolve an individual company – it is only the cancellation of the transaction registered with the competent authority, where individual companies and partnership agreements have many similarities. Both are easy to model and offer few legal obligations. The profits, losses and taxes of both organizations are directly related to the owners of the business. While both structures offer freedom and simplicity, they do not protect businesses. Since an individual company does not have its own legal entity, the contractor is subject to unlimited personal liability for all debts incurred by the company.
In other words, if a business is unable to meet its financial obligations, creditors may demand repayment from the business owner, who must use his personal assets to repay unpaid debts or other financial obligations.