What Is a Commercial Organization?

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A commercial organization is a group with a particular set of skills, resources or priorities in place geared toward turning a profit. The residual income left after deducting expenses is available to be distributed to employees or shareholders or reinvested back into the company at management’s discretion.

There are six types of business organizations for the purposes of collection of federal taxes. Business organizations are commercial or industrial enterprises and the people who constitute them. Commercial organizations are incorporated businesses. The shareholders have limited-liability protection, and such organizations have full discretion in terms of determining the amount of profit that is distributed or retained and are presumed to be entities established for purposes of making profits.

Sole proprietors are unincorporated businesses, which are the easiest form of business to set up. Partnerships are unincorporated businesses, and income obtained is credited to the partners even if the partnership decides to retain some or all of the net income. Trusts are formed upon the death of an individual for the purpose of providing continuity of the investments and business activities of the deceased. Non-profit organizations are formed for civic, charitable and artistic purposes. Such organizations are exempted from paying federal or state taxes.