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forms of business ownership

franchise
a legal agreement to sell a parent company’s product or services in a designated geographic area
sole proprietorship
a business that is owned and operated by one person (most common form)
unlimited liability
type of investment when the business owners financial liability is not limited to investments in the business, but extends to his/her total ability to make payments
partnership
legal agreement between 2 or more to be jointly responsible for the success or the failure of a business
general partnership
type of business ownership in which each partner shares in the profits and losses
limited partnership
type of business ownership in which each limited partner is liable for any debts only up to the amount his/her investment in the company
limited liability
type of investment in which the personal assets of the owners cannot be taken if a company does not meet its financial obligations or if it gets into legal trouble
corporation
legal entity created by either a state or federal statute, authorizing individuals or operate an enterprise
stockholders
owner of a corporation with limited liability
foreign corporation
one that is incorporated under the laws of a state that differs from the one in which it does business
limited liability company
relatively new form of business organization that is a hybrid of a partnership and a corporation
doing business as (DBA)
the registration by which the county government officially recognizes that a new proprietorship or partnership exists
articles of incorporation
identifies the name and address of a new corporation, its purpose, the names of the initial directors, and the amount of stock that will be issued to each director
4 ways to enter business
1. purchase a non-franchise business
2. take over a family business
3. start a new business
4. purchase a franchise
purchasing a non-franchise business: advantages
-why it was sold
-records
-conditions
-assist with management
purchasing a non-franchise business: disadvantages
-no help from previous owner
taking over a family business: advantages
-family member owner could help
taking over a family business: disadvantages
-conflicts with family
-planning/management could be challenging
starting a new business: advantages
-freedom of choice
-plan/organize
-choose business, location, sell
-no debts
-no reputation
starting a new business: disadvantages
-establish reputation
-build customer base
purchasing a franchise: advantages
-advertising
-have a lot of help
-well known name
-business plan
purchasing a franchise: disadvantages
-planning
-management training
-merchandising
-day to day operations
-initial cost/feess
-strict
4 possible forms of business organization
1. sole proprietorship
2. partnership
3. corporation
4. limited liability
sole proprietorship: advantages
-easy to start
-taxed less
-owner has great control
-keeps all profits
sole proprietorship: disadvantages
-financial
-unlimited liability
-responsible for debts and legal judgments
what are the 2 kinds of partnership?
general and limited
what is the difference between general part. and limited part.?
general: each partner shares in the profits and losses
limited: each partner is liable for up to the amount of his/her investment in the company
partnership: advantages
-combines skills
-each partner has a voice
-taxed solely
partnership: disadvantages
-not always agree
-responsible for shares
-business is dissolved if one partner dies
what are 4 unique features of a corporation?
1. legal permission to operate
2. separate legal entity
3. stockholders
4. board of directors
corporation: advantages
-limited liability
-easily enter/exit business
-areas handled by someone with expertise
corporation: disadvantages
-formation is complex
-government regulation increased
-taxable corporate profits
-accounting/record keeping are precise
how does registering your business differ if you are a sole proprietorship vs. a corporation?
personal assets are better protective in corporations than sole proprietor
why do certain businesses need to obtain a license?
for consumer protection
ex: health license/inspection to operate and sell food safely
most common form of business ownership
sole proprietorship
allows the greatest freedom in making decisions
sole proprietorship
easiest form of business organization to start
sole proprietorship
taxed less than any other form
sole proprietorship
raising outside capital is the most difficult type of business
sole proprietorship
this owner is personally liable for the debts of the business
sole proprietorship
quicker decision making
sole proprietorship
owner keeps all profits
sole proprietorship
unlimited liability
sole proprietorship & partnership
skills of the owners are combined
partnership
2 types of business organization: general and limited
partnership
actions of one owner are legally binding on the other owners
partnership
each owner has a limited liability
partnership
each owner has a voice
partnership
death of one of the owners dissolves the business
partnership
shared losses
partnership
combined funds
partnership
increased diversity of experience
partnership
shared decision making
partnership
the owners are called members
limited liability
blend of characteristics of other types of businesses
limited liability
each member has limited liability
limited liability
growth limited to personal motivation
limited liability
can own assets and borrow money without directly involving the shareholders
corporation
most complicated form of business ownership
corporation
governing bodies or boards hire directors to manage the affairs of the business
corporation
government regulations are the most complicated with this form of business organization
corporation
value of this type of business is divided into shares of stock
corporation
easy to raise money for expansion of the business
corporation
each owner has limited liability
corporation
owners are called stockholders
corporation
difference between unlimited and limited
U- the business owners financial liability is not limited to investments in the business, but extends to his/her total ability to make payments

L- the personal assets of the owners cannot be taken if a company doesn’t meet its financial obligations or if it gets into legal trouble

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