Chapter 3: BUSINESS OWNERSHIP

Sole Proprietorships

• Is a business that is owned and operated by

one person.
• The individual has unlimited liability.
 Advantages of sole proprietorships

• Easy to manage-make decisions by himself .

• Sole ownership of profit.
• Decision making and control vested in one
owner.
• Flexibility.
• Relative freedom from governmental control.
• Freedom from corporate business taxes.
 Disadvantages of sole proprietorships

• Unlimited liability.
• Lack of continuity.
• Less available capital
• Relatively difficulty obtaining long-term
financial.
• Relatively limited viewpoint and experience.
 Partnerships
• Is an association of two or more persons acting
as co-owners of a business for profit.
• the following are examples of the types of
information customarily written the agreement:
1.name,purposes,domicile
2.Duration of agreement.
3.Character of partners(general or limited ,active
or silent)
 Partnerships
4.Contributions by partners(at inception , at
later date).
5.Draws or salaries.
6.Sale of partnership interest
7.additions,alterations or modifications of
partnership.
 Advantages of partnerships
• Ease of formation.
• Direct rewards.
• Growth and performance facilitated.
• Flexibility.
• Relative freedom from governmental control
and regulation.
• Possible tax advantage.
 Disadvantages of partnerships
• Unlimited liability of at least one partner.
• Lack of continuity.
• Relatively difficulty obtaining large sums of
capital.
• Bound by the acts of just one partner.
• Difficulty of disposing of partnership interest.
Factors associated with partnerships success

• Partnership attributes
1.Commitment
2.Coordination
3.Interdependence
4.Trust
• Communication behaviour
1.quality
2.information sharing
3.Participation

• Conflict resolution technique

1.Joint problem solving
2.Persuasion
3.Smoothing
4.Domination
5.No harsh words
6.Arbitration
 Corporations
Is an artificial being,invisible,intangible and existing only in
contemplation of the law.
• Advantages of corporations
1.limited liability
2.Transfer of ownership
3.unlimitedllife.
4.Relative ease of securing capital in large amounts.
5.Increases ability and expertise.
Disadvantages of corporations
1.Activity restriction
2.Lack of representation.
3.regulation.
4.Organizing expenses.
5.Double taxation.
• Partnership success
1.Satisfaction
2.Dyadic sales
Specific forms of partnerships and corporate
• Limited partnerships
 are used in situations where a form of
organization is needed that permits capital
investment without responsibility for
management and without liability for losses
beyond the initial investment.
 LIMITED LIABILITY PARTNERSHIPS

Is a relatively new from of partnership that allows professionals

the tax benefits
For example,
1. File the appropriate from with the secretary of state
2. Pay an annual fee of partner
3. Maintain at least in professional liability insurance
 Who wants to be a CEO?

• You stick to your benefits and the company’s mission and

never compromise your values
• As a visionary, you are able to set long term, realistic goals.
• Others rally around you to support your plan
• Your listening and communication skills are first-rate and
highly respected
• You enjoy being a coach who fosters teamwork
• Part of your goal is to seek out new ideas constantly
• You are comfortable with change
• You genuinely care for and respect others
 You know you’re not CEO material..
• Staffers and customers complain about your poor
communication skills behind your back
• Your rigid and inflexible behavior frustrates
employees
• Your employees aren’t straight with you
• Diversity issues are not important
• You’re afraid of delivering bad news
• Self-centeredness makes you insensitive to others
 Limited liability companies
• is a hybrid form of business enterprise that offers the limited
liability of a corporation but the tax advantages of a
partnership
• Advantage
• -does not pay taxes on an entity
• -limited to the amount of their investment
• Disadvantages
• -Relatively
• -status differ from state to state
• -promote some uniformity among the state in respect to LLC
statutes
 Other corporation classifications

1. Domestic and foreign corporations

2. Public and private corporations
3. Nonprofit corporations
4. Professional corporations
5. Close corporations
 Franchising
• Is any arrangement in which the owner of a trademark, trade name , or
copyright has licensed others to use it in selling goods services.
• Advantage
• -training and guidance
• -brand-name appeal
• -a proven track record
• -financial assistance
• Disadvantages
• -franchise fees
• -the control exercised by the franchisor
• -unfulfilled promise by some franchisors
 Type of franchise
• The basic franchise fee
• Insurance
• Opening product inventory
• Remodeling and leasehold improvements
• Utility charges
• Payroll
• Debt service
• Bookkeeping and accounting fees
• Legal and professional fees
• State and local licenses, permits, and certificates