Chapter 5: Forms of Business Ownership
Forms of Business Ownership Names
• A SOLE PROPRIETORSHIP is a business that is owned, and usually managed, by one person; it is the most common form.
• A PARTNERSHIP is a legal form of business with two or more owners.
• A CORPORATION is a legal entity with authority to act and have liability separate from its owners.
• A FRANCHISE AGREEMENT is an arrangement whereby someone with a good idea for a business (the FRANCHISOR) sells the rights to use the business name and to sell a product or service (the FRANCHISE) to others (the FRANCHISEE) in a given territory.
• A COOPERATIVE is a business owned and controlled by the people who use it—producers, consumers, or workers with similar needs who pool their resources for mutual gain.
• A LIMITED-LIABILITY COMPANY (LLC) is a company similar to an S corporation but without the special eligibility requirements.
In Groups of 2, assign the below advantages/disadvantages to the forms of business ownership above AND list an example for each from Troy.
ABILITY TO BECOME A LARGE SIZED COMPANY.
BEING YOUR OWN BOSS.
COATTAIL EFFECTS FROM OTHER LIKE BUSINESSES.
COMPLEMENTARY KNOWLEDGE.
DIFFICULTY OF TERMINATION.
DISAGREEMENTS AMONG PARTNERS.
DIVISION OF PROFITS.
DOUBLE TAXATION.
EASE OF DRAWING TALENTED EMPLOYEES.
EASE OF OWNERSHIP CHANGE.
EASE OF STARTING AND ENDING THE BUSINESS.
EXTENSIVE PAPERWORK.
FEW FRINGE BENEFITS.
FINANCIAL ADVICE AND ASSISTANCE.
FLEXIBLE DISTRIBUTION OF PROFITS AND LOSSES.
FLEXIBLE OWNERSHIP RULES.
INITIAL COST.
LARGE START-UP COSTS.
LEAVING A LEGACY
LIMITED FINANCIAL RESOURCES.
LIMITED GROWTH.
LIMITED LIABILITY.
LIMITED LIFE SPAN.
LONGER SURVIVAL.
LOWER FAILURE RATE.
MANAGEMENT AND MARKETING ASSISTANCE
MANAGEMENT DIFFICULTIES.
MANAGEMENT REGULATION.
MORE ECONOMIC BUYING POWER
MORE FINANCIAL RESOURCES.
MORE MONEY FOR INVESTMENT.
NATIONALLY RECOGNIZED NAME.
NO SPECIAL TAXES.
OPERATING FLEXIBILITY.
OVERWHELMING TIME COMMITMENT.
PERPETUAL LIFE
POSSIBLE CONFLICT WITH SHAREHOLDERS AND BOARD OF DIRECTORS.
PRIDE OF OWNERSHIP.
RESTRICTIONS ON SELLING.
RETENTION OF COMPANY PROFITS.
SEPARATION OF OWNERSHIP FROM MANAGEMENT
SHARED MANAGEMENT AND POOLED RESOURCES
SHARED ROYALTIES
TWO TAX RETURNS.
UNLIMITED LIABILITY.
1. Sole Proprietorship
Example
Pros?
Cons?
2. Partnership
Example
Pros?
Cons?
3. Corporation
Example
Pros?
Cons?
4. Cooperative
Example
Pros?
Cons?
5. Franchise
Example
Pros?
Cons?
6. Not-for-Profit
Example
Pros?
Cons?
7. LLC
Example
Pros?
Cons
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