Please enable JavaScript.
Coggle requires JavaScript to display documents.
Topic 5 : Forms Of Business Ownershipbs ownership, LO1: Explain the…
Topic 5 : Forms Of Business Ownership
The best form of ownership --> entrepreneur's particular situation
Understand the characteristics of each form of ownership and how well it matches the entrepreneur's business and personal circumstances
Types of Partners
General Partners
- Active in managing the business
- Unlimited Liability
- every partnership at least have 1 general partner
Limited Partners
- Cannot participate in managing the business
- Limited liability
Silent Partners
- Not active in bs but is a member of partnership
Dormant Partners
- Neither active/ generally known
-
-
Sole Proprietorship
-
-
Disadvantages
-
Limited skills & Capabilities - lack of skills, knowledge & experience
-
-
-
Partnership
2 or more people co-own a business
Create partnership agreement, state in writing terms - which partner agree to operate the partnership and protect the partner's interest.
RUPA - Revised Uniform Partnership Act
- agreement - business's profit and lossess will be shared
- Right to participate in managing the opration of the partnership
Advantages
Easy to establish
Inexpensive, obtain necessary business licenses and submit minimal number of forms
Complementary skills of partners
In successful partnership, the parties’ skill and ability complement one another. Strengthening the companies’ managerial foundation.
-
Division of profits
The partnership agreement should articulate each partner’s contribution to the business and his or her share of profits
Larger pool of capital
Each partner's asset base enhances the bs pool of capital & improves its ability to borrow needed funds
-
-
-
-
Disadvantages
Unlimited liability of at least one partner
At least 1 member of every partnership must be a general partner
The general partner has unlimited liability for any debts remain after the partnership assets exhausted.
-
-
Capital accumulation
It is not as effective as the corporate form of ownership, which can raise capital by selling shares of ownership to outside investors.
Potential for personality and authority conflicts
Making sure that the partners’ work habits, goals, ethics, and general philosophy are compatible.
Corporation
-
Types
Publicly held
large num. of shareholders, large stock exchange
Closely held
Shares controlled by small number
Could be family, friends or relatives
Avoid Legal Tangles
-
-
-
-
-
Make it clear that the business is a corporation – officers should sign all documents in the corporation’s name.
-
-
LO1: Explain the advantages and the disadvantages of the 3 major forms of ownership: The sole proprietorship, the partnership, & the corporation.
-
-
-