Types/ Forms of Business
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Transcript of Types/ Forms of Business
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FORMSOFBUSINESS
OWNERSHIP
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SOLE PROPRIETORSHIPS
PARTNERSHIPS
CORPORATIONS
THREE MAJOR TYPES OF
OWNERSHIPS
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WHO HAS WHICH PIECE OF
PIE?
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....owned by a single individual
Sole Proprietorship
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Fe
atures
ofSole
P
roprietorship
Owned and operated by a single personOwnership flexibility
Management flexibilityAbsolute profit retention
Easy to form and dissolve
Mostly found in small businesses Owner only requires a few legal
prerequisites
Name registrationNecessary licence
Liability coverage(optional)
Operated by owners own finances
Owner makes decision, takes action &
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...owned by two or more people/groups
Partnerships
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P
artner
ships
Owned and operated by two or more
persons
Easy to form Hard to dissolve
Formation
Formal(contractual relation) Informal (verbal relation)
Owners require only a few legal
prerequisites Name registration
Necessary license
Increased access to borrowed funds
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Types of Partners
General or activepartnership
Limited or SleepingPartner
Active in the operation
of a business Liable for all of its
debts.
Gets most benefits-
profit, authority &unlimited liability.
Not involved in its daily
operations Liability limited to their
investment
Only invests in a
business, can have avote on certain issues
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General Partnership
Limited Partnership
Joint Ventures
Types of Partnerships
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General Partnership
No local or state filings are required to create this
type of partnership.
Each partner is personally liable for all of the debts
of the partnership (unlimited liability)
Any one partner can form partnership by entering
into a contract on behalf of the partnership
Also, each partner is personally liable for the entireamount of any partnership debt
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Limited Partnership
Consists of one or more generaland limitedpartners.
Limited liability
Often used as investment medium for large
projects requiring a large amount of cash.
The legal structure used by most venture
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Joint Ventures
A temporary partnership between companies
A company finds a partner in the country where it wants
to do business.
Attract small firms to conduct international business
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a legal entity separate from its owners,
the shareholders
Corporation
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Feature
sofCor
poration
s
Assets and liabilities are separate by its
owners
Regular corporations are called Ccorporations
Corporations must have at least one
shareholder
The shareholders of corporations have
limited liability protection
Presumed to be for-profit entities, and so
they can have unlimited years of losses
Businesses whose size reaches 75
shareholders may organize themselves as
S corporation
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Types of Corporations
Domestic corporation Incorporated within a state or a city
Foreign corporationA business done in another state by a firm
Alien corporationA firm incorporated in one nation does
business in another.
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O
wnership
Forms of
Ownerships
:-
Sole Proprietorship Partnership Corporation
Number of
owners
One owner Two or more Unlimited #. of
shareholders- up to 75 in
s corporation
Liability Unlimited personal
liability
Personal assets at
risk of any partner
Limited
Advantage
s
1. Owner retains all
profits
2. Easy to form and
dissolve
3. Owner has flexibility
1. Easy to form
2. Benefits from
complimentary skills
3. Expanded financial
capacity
1. Limited financial
liability
2. Specialized skills
3. Expanded financial
capacity
4. Large scale
operations
Disadvanta
ges
1. Unlimited financial
liability
2. Financing limitations
3. Management
deficiency & lack of
efficiency
1. Unlimited financial
liabilities
2. Interpersonal
conflicts
3. Lack of continuity
4. Difficult to dissolve
1. Difficult and
costly to form
and dissolve
2. Tax
disadvantages
3. Legal
restrictions