Chapter 4 - Forms of Business Ownership

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Forms of Business Ownership

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Forms of Business Ownership

• Sole Proprietorship • Partnership • Corporation

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• The (Blank) is that type of business entity owned and operated by a single person. • The big percentage of businesses owned by (BLANK) indicate the popularity of this ownership type.

Sole Poprietorship

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Advantages of Sole Proprietorship

• Ease and Cost of Formation • Secrecy • Distribution and Use of Profits • Control of the Business • Government Regulation • Taxation • Closing the Business

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Disadvantages of Sole Proprietorship

• Owner's Lack of Ability and Experience • Difficulty in Attracting Good Employees • Difficulty in Raising Capital • Limited Life of the Firm • Unlimited Liability of the Proprietor

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A (Blank) is a legal association of two or more persons as co-owners of an unincorporated business.

Partnership

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Advantages of Partnership

• Ease of Formation • Pooling of Knowledge and Skills • Availability of More Funds • Ability to Attract and Retain Employees • Tax Advantage

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Disadvantages of Partnership

• Unlimited Liability • Limited Life • Potential Conflict Between Partners • Difficulty in Dissolving the Business

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Types of Partnerships

• General Partnership • Limited Partnership

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An association of two or more persons, each with unlimited liability, who are actively involved in the business.

General Partnership

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An arrangement in which the liability of one or more partners is limited to the amount of assets they have invested in the business.

Limited Partnership

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  • A (Blank) is an enterprise chartered by law, with most of the legal rights of a person, including the right to conduct a business, to own and sell property, to borrow money, and to sue or be sued.

  • The (Blank) form of business is the third ownership option open to businesspersons.

  • Owners of these are called stockholders.

  • They are issued certificates of ownership called stock.

Corporation

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Advantages of Corporation

• Limited Liability • Ease of Expansion • Ease of Transferring Ownership • Relatively Long Life • Greater Ability to Hire Specialized Management

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Disadvantages of Corporation

• More Expensive and Complicated to Organize • Double Taxation • More Extensive Government Restriction and Reporting Requirements • Employment Lack Personal Identification with and Commitment

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The corporate form of ownership has been modified to cater to special needs.

Modifications of the Corporate Form of Ownership

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Types of Modifications of the Corporate Form of Ownership

• Cooperatives • Mutual Companies

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  • is an organization composed of individuals or businesses that have banded together to reap the benefits of belonging to a large organization.

  • are not organized for profit but to make its members individually profitable or save money.

Cooperatives

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Types of Cooperatives

• Credit Union

  • It accepts deposits from the members and lends money to its members at a very reasonable interest rate.

• Producers Cooperative

  • its purpose is to actually assist one another in the procurement of materials, machinery, equipment, and other time-saving devices.

• Marketing Cooperative

  • Its purpose is to assist members in the marketing of their products.

• Consumer Cooperative

  • Its purpose is to provide members with quality goods and services at reasonable prices.

• Service Cooperative

  • Its purpose is to make services readily available and at a lower price.

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A (BLANK) "is a financial-service firm (such as an insurance company or a savings and loan association) owned by its policyholders or depositors.

Mutual Companies

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Types of Mutual Companies

• Mutual Savings Banks

  • It is owned by depositors and specializes in savings and mortgage loans.

•Mutual Insurance Company

  • It is a cooperative corporation organized and owned by its policyholders.

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Other Forms of Business Organization

• Joint stock company

  • The joint stock company is a form of business enterprise in which the capital is divided into small units permitting a number of investors to contribute varying amounts to the total, profits being divided between stockholders in proportion to the number of shares they own.

• Joint Venture

  • A joint venture is best regarded as a particular partnership established for a specific undertaking.

  • This type of organization is created for the purpose of bringing together several partners to engage in a business activity which is normally very specialized and which exists for a Iimited, specific purpose.

• Business Trust

  • The business trust is a legal form of organization in which a trustee is appointed to manage the business and its operations through a trust relationship.

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