Summary: Identify and explain the 3 basic forms of business ownership
Selecting a legal form of business organization is a complex and critical decision for the owners of any enterprise. Various factors must be considered when structuring a business: ease of formation, financial liability, financial resources available, taxes, management skills available, the ability to raise capital, and the personal interests of those involved.
In this article, we will tackle 8 summarized ideas in the area of business ownership which are written below;
1. Identify and explain the three basic forms of business ownership.
There are three forms of business ownership. Sole proprietorships are organizations owned and usually operated by a single individual. A partnership is a business operated by two or more people as co-owners. A corporation is a legal entity separate from its owners.
2. Outline the advantages and disadvantages of sole proprietorships.
The advantages of sole proprietorships are retention of all profits, ease of formation and dissolution, and ownership flexibility. The disadvantages are unlimited financial liability, financial limitations, management deficiencies, and lack of continuity.
3. Compare the advantages and disadvantages of partnerships.
The advantages of partnerships are ease of formation, complementary management skills, and expanded financial capability. The disadvantages are unlimited financial liability, possible interpersonal conflicts, lack of continuity, and complex dissolution.
4. Differentiate between general partnerships and limited partnerships.
General partnerships are those in which all partners carry on the business as co-owners and all are liable for the debts of the business. Limited partnerships are those composed of one or more general partners and one or more limited partners.
Limited partners are likely to be less active in the operations of the partnership and their possible losses are limited to the amount of their investment.
5. Outline the advantages and disadvantages of corporations.
The advantages of corporations are limited financial liability, specialized management skills, expanded financial capability, and economies of larger-scale operation.
The disadvantages are the difficulty and cost of establishing the company, high taxes, legal restrictions, and possible alienation of some employees.
6. Discuss how a corporation is organized and operated.
In organizing a corporation, consideration should be given to hiring an attorney, selecting the state in which to incorporate, and following the correct legal procedures for incorporating. Registration as a domestic, foreign, or alien corporation is also important.
Stockholders own the corporation, the board of directors governs it, and top management is responsible for its actual operation. Subsidiaries are corporations owned by other (parent) corporations.
7. Differentiate among vertical, horizontal, and conglomerate mergers.
Vertical mergers are those that occur between firms at different levels in the production - marketing process, such as a producer and a large retailer. Horizontal mergers are between firms in the same industry. Conglomerates are mergers of unrelated firms.
8. Identify the differences among private ownership, public ownership, and collective ownership (cooperatives).
Private ownership refers to an organization owned by an individual or individuals regardless of whether it was setup as a sole proprietorship, partnership, or corporation.
One alternative to private ownership is public ownership, in which a government unit or its agency owns and operates an organization on behalf of the population served by that unit. Another alternative is the cooperative, in which there is collective ownership of production, storage, transportation, and/or marketing activities.
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In this article, we will tackle 8 summarized ideas in the area of business ownership which are written below;
- Identify and explain the three basic forms of business ownership.
- Outline the advantages and disadvantages of sole proprietorships.
- Compare the advantages and disadvantages of partnerships.
- Advantages and disadvantages of corporations.
- Differentiate between general partnerships and limited partnerships.
- Discuss how a corporation is organized and operated.
- Differentiate among vertical, horizontal, and conglomerate mergers.
- Explain the differences among private ownership, public ownership, and collective ownership (cooperatives)
1. Identify and explain the three basic forms of business ownership.
There are three forms of business ownership. Sole proprietorships are organizations owned and usually operated by a single individual. A partnership is a business operated by two or more people as co-owners. A corporation is a legal entity separate from its owners.
2. Outline the advantages and disadvantages of sole proprietorships.
The advantages of sole proprietorships are retention of all profits, ease of formation and dissolution, and ownership flexibility. The disadvantages are unlimited financial liability, financial limitations, management deficiencies, and lack of continuity.
3. Compare the advantages and disadvantages of partnerships.
The advantages of partnerships are ease of formation, complementary management skills, and expanded financial capability. The disadvantages are unlimited financial liability, possible interpersonal conflicts, lack of continuity, and complex dissolution.
4. Differentiate between general partnerships and limited partnerships.
General partnerships are those in which all partners carry on the business as co-owners and all are liable for the debts of the business. Limited partnerships are those composed of one or more general partners and one or more limited partners.
Limited partners are likely to be less active in the operations of the partnership and their possible losses are limited to the amount of their investment.
5. Outline the advantages and disadvantages of corporations.
The advantages of corporations are limited financial liability, specialized management skills, expanded financial capability, and economies of larger-scale operation.
The disadvantages are the difficulty and cost of establishing the company, high taxes, legal restrictions, and possible alienation of some employees.
6. Discuss how a corporation is organized and operated.
In organizing a corporation, consideration should be given to hiring an attorney, selecting the state in which to incorporate, and following the correct legal procedures for incorporating. Registration as a domestic, foreign, or alien corporation is also important.
Stockholders own the corporation, the board of directors governs it, and top management is responsible for its actual operation. Subsidiaries are corporations owned by other (parent) corporations.
7. Differentiate among vertical, horizontal, and conglomerate mergers.
Vertical mergers are those that occur between firms at different levels in the production - marketing process, such as a producer and a large retailer. Horizontal mergers are between firms in the same industry. Conglomerates are mergers of unrelated firms.
8. Identify the differences among private ownership, public ownership, and collective ownership (cooperatives).
Private ownership refers to an organization owned by an individual or individuals regardless of whether it was setup as a sole proprietorship, partnership, or corporation.
One alternative to private ownership is public ownership, in which a government unit or its agency owns and operates an organization on behalf of the population served by that unit. Another alternative is the cooperative, in which there is collective ownership of production, storage, transportation, and/or marketing activities.
Summary: Identify and explain the 3 basic forms of business ownership
Reviewed by BP Admin
on
August 03, 2017
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Reviewed by BP Admin
on
August 03, 2017
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