Creativity Means Productivity. Your profits and losses are recorded on a form called Schedule C, which is filed with your 1040. There are six major business ownership structures namely: Each form of business comes with its own set of advantages and disadvantages. Would your portfolio be riskless? LLP provides protection for each partner against debt incurred by the other partner(s). Hook Industriess capital structure consists solely of debt and common equity. Looks like youve clipped this slide to already. Athletes can capture their stunts with GoPro and these sporting events are sponsored by Red Bull. A corporation can sell stock, either common or preferred, to raise funds. Be perfectly prepared on time with an individual plan. Given this information, construct the firms 2016 income statement.b. A sole proprietorship rarely outlives its owner. CorporationThe corporate structure is more complex and expensive than most other business structures. The general partners own and operate the business and assume liability for the partnership, while the limited partners serve as investors only; they have no control over the company and are not subject to the same liabilities as the general partners. They must be registered with the company registrar. \text{Cash} & \text{\$ 102.850} & \text{\$ 89.725}\\ As a result, there's just one level of federal tax to pay. Test your knowledge with gamified quizzes. Raising capital is the responsibility of the sole proprietor. \text{Total liabilities and equity} & \text{\$ 311.824} & \text{\$ 252.670}\\ Selecting the sole proprietorship business structure means you are personally responsible for your company's liabilities. The company specializes in automobiles, and it is ranked amongst the top ten Fortune 500 companies. Partners are responsible for losses or debt incurred by the business. The need to protect your personal assets from debt makes business risk and liability an important consideration. 
General partnership and limited liability partnership. An authorization granted by a government or company to an individual or group enabling them to carry out specified commercial activities, e.g., providing a broadcasting service or acting as an agent for a company's products. Examples include Amnesty International and the Boy Scouts. SlideShare uses cookies to improve functionality and performance, and to provide you with relevant advertising. \text{Total common equity} & \text{\$ 157.605} & \text{\$ 128.774}\\ Profits generated from non-profit corporations are shared among the board. $$ Considering whether you want your business to keep running after you are gone is also important. if you need ca services call at 9310165114 or visit us CA Services, easy to set up - no legal formalities needed, owner has complete control - not answerable to anybody else, the owner is able to choose times and patterns of working, because it is a small business, the entrepreneur is able to establish close personal relationships with staff and customers, the business can be based on the interests or skills of the owner since the entrepreneur is not as an employee for a larger firm, the owner has unlimited liability so all of the owner's assets are potentially at risk, since it is a small business, it faces competition from larger firms that have operated for a longer time in the market, the owner is at risk since they are responsible for all aspects of management of the business, since he is on his own, it is difficult to raise additional capital, involves of long hours of work in order to make the business pay. See our User Agreement and Privacy Policy. lack of continuity - the business does not have separate legal status so when the owner dies, the business ends too. It provides the proprietor with flexibility in running the business. Give one advantage and one disadvantage of LLC, Advantage of LLC - Limited liability provide option for owners to control how the business is run, Disadvantage of LLC - Due to legal filings, starting up a limited liability company may prove expensive, Explain the business ownership structure, cooperative. For example, there is no limitation on the number of shareholders an LLC can have, unlike an S corporation, which has a limit of 100 shareholders. The decisions involved impact daily operations, taxation, and the level of risk. Not only will this decision have an impact on how much you pay in taxes, but it will affect the amount of paperwork your business is required to do, the personal liability you face and your ability to raise money. Create flashcards in notes completely automatically. Factors that determines business ownership are -, Give one advantage and one disadvantage of PLC, Advantage of PLC - Capital can be easily generated through trading shares publicly, Disadvantage of PLC - Anyone who can afford to buy shares can be a shareholder. Corporations are formed under the laws of each state with its own set of regulations. Partners can be held liable for the actions of other partners. Identify your study strength and weaknesses. 714 0 obj
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Generally they are safer decisions to start up based on an already proven business model, proven product, advertising done by corporate, and limited liability. What is the firms 2016 EVA? Free access to premium services like Tuneln, Mubi and more. After all of these changes, what will be the difference in the required returns for HRI and LRI? Private limited companies provide limited liability to their shareholders. That's because an S corporation has some appealing tax benefits and still provides business owners with the liability protection of a corporation. Non-profit organisations are exempt from paying corporate income tax if they meet the necessary criteria. I understand that the data I am submitting will be used to provide me with the above-described products and/or services and communications in connection therewith. It gives the owner the legal right to make certain business decisions. You use Schedule SE to calculate how much self-employment tax you owe. \text{Retained earnings} & \text{57.605} & \text{38.774}\\ \begin{matrix} In conclusion, there are six business ownership structures, each with its own advantages and disadvantages. The long-term outcomes of a leveraged buyout are higher performance and higher risk. In choosing a business structure best suited to your business, the following factors should be considered: The cost of setting up a business increases proportionally to the amount of legal paperwork. Explain. Corporations also continue indefinitely, even if one of the shareholders dies, sells the shares or becomes disabled. At tax time, the partnership must file a tax return (Form 1065) that reports its income and loss to the IRS. Raising funding for projects can be complicated. Earnings and losses pass through to the owners and are included on their personal tax returns. Sole proprietorships and certain types of partnerships face unlimited liability, meaning that the owners are personally liable for any debts the business incurs. Because each business form comes with different tax consequences, you will want to make your selection wisely and choose the structure that most closely matches your business's needs. Shares cannot be sold to the public (the current owners decide to whom they will sell them). Have all your study materials in one place. a disorganised blog on different study notes hoping that this will help others. Owners of the organisation are protected from personal liability. to students, Indiana University, Purdue University, Indianapolis BUS-Z 371, Lone Star College System, Woodlands PSYC 2314, Dedan Kimathi University of Technology ACC MISC. Thus, understanding the various types of ownership is essential to these folks. there is a separate legal personality between the shareholders and the business, the company is able to continue in the event of the death of a shareholder, the original owner of the company is often able to retain control of the business, raising capital can be done by the sale of shares to family, friends and employees, a private limited company has a greater status compared to an unincorporated business, there are legal formalities that are involved when establishing the business, capital cannot be raised by the sale of shares to the general public, it is quite difficult for shareholders to sell shares, there is less secrecy about the financial affairs that the company has compared to a sole trader and a partnership, there is a separate legal identity between the shareholders and the business, continuity (the company is able to continue in the death of a sole trader, ease of buying and selling shares for the shareholders, they have access to substantial capital sources since they have the ability to offer shares for sale to the general public, there are legal formalities needed when setting up this business, expensive - this is because there is a need to hire business consultants and financial advisers when creating such a company, share prices are subject to fluctuate due to reasons beyond the control of the owners, legal requirements concerning disclosure of information to shareholders and the public, there is a risk of takeover due to the availability of the shares on the stock exchange, directors influenced by short term objectives of major investors, fewer chances of the new business failing since the name of an established brand and product are being used, advice and training is offered by the franchiser, national advertising is being paid for by the franchiser, the supplies used in the franchise are obtained from quality checked suppliers, franchiser agrees not to open another branch in the local area, share of profits or revenue have to be paid to the franchiser each year, the initial franchise fee can be expensive to pay, local promotion still have to be paid for by the franchisee, no choice of supplies or suppliers to be used, there are strict rules over pricing and layout of the outlet reduces the franchisee's control over their own business, the costs and risks of a new business venture are shared - this is a major consideration when the cost of developing new products is rising rapidly, different companies might have different strengths and experiences and they therefore fit well together, they might have their major markets in different countries and they could exploit these with the new product more effectively than if they both decided to 'go it alone. What percentage of the companys capital structure consists of debt? Experts say this can hamper the company's ability to raise capital. What is the simplest business ownership structure? What are the 6 basic forms of business ownership? taxation- taxed on share of firms' earnings. Its 100% free. External view of a General Motors building, Wikimedia Commons. Meaning it can take loans, it can sue individuals or businesses, it is liable to its own debts. End of preview. \text{Total assets} & \text{\$ 311.824} & \text{\$ 252.670}\\ WP. hb```f``zsAb,=@nE!gFlb,7.kjhhy:[
q7wuuv The proprietor is bears responsibility for all business debt and losses, 2. 
Even after you settle on a business structure, remember that the circumstances that make one type of business organization favorable are always subject to changes in the laws. But opting out of some of these cookies may affect your browsing experience. I can advise you this service - www.HelpWriting.net Bought essay here. This business ownership structure means two or more people own a business. Sole Proprietorship involves a business being owned and directed by an individual. A limited partnership has both general and limited partners. Select all that apply. Partnerships are of two types, namely: General partnership - this involves an investment from all partners, and all partners bear the responsibility for any debt incurred by the business. \text{Inventories} & \text{38.444} & \text{34.982}\\ It can issue debt at $r_{d}=11 \%$, and its common stock currently pays a $2.00 dividend per share [math]\left(\mathrm{D}_{0}=\$ 2.00\right)[/math]. Can be run by a board of directors that does not see eye to eye with you as the owner, you do not have complete say in the direction of your company, can have double taxation, and roles within the company/structure can be confusing. \text{Total current liabilities} & \text{\$ 77.955} & \text{\$ 59.982}\\ Mr Pedro is a reliable loan officer.In the past, we have had experience with several other banks and have found the process frustrating and tedious. it is expensive to maintain the control of large numbers of subsidiary companies, the holding company may try to exploit the subsidiary company, managed with social objectives rather than solely with profit objectives, loss-making services might still be kept operating if the social benefit is great enough, finance raised is mainly from the government, tendency towards inefficiency due to the lack of strict profit targets, subsidies from government can also encourage inefficiencies. The ownership of the business is divided by shares in the company. The following companies are examples of types of business ownership.
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General partnership and limited liability partnership. An authorization granted by a government or company to an individual or group enabling them to carry out specified commercial activities, e.g., providing a broadcasting service or acting as an agent for a company's products. Examples include Amnesty International and the Boy Scouts. SlideShare uses cookies to improve functionality and performance, and to provide you with relevant advertising. \text{Total common equity} & \text{\$ 157.605} & \text{\$ 128.774}\\ Profits generated from non-profit corporations are shared among the board. $$ Considering whether you want your business to keep running after you are gone is also important. if you need ca services call at 9310165114 or visit us CA Services, easy to set up - no legal formalities needed, owner has complete control - not answerable to anybody else, the owner is able to choose times and patterns of working, because it is a small business, the entrepreneur is able to establish close personal relationships with staff and customers, the business can be based on the interests or skills of the owner since the entrepreneur is not as an employee for a larger firm, the owner has unlimited liability so all of the owner's assets are potentially at risk, since it is a small business, it faces competition from larger firms that have operated for a longer time in the market, the owner is at risk since they are responsible for all aspects of management of the business, since he is on his own, it is difficult to raise additional capital, involves of long hours of work in order to make the business pay. See our User Agreement and Privacy Policy. lack of continuity - the business does not have separate legal status so when the owner dies, the business ends too. It provides the proprietor with flexibility in running the business. Give one advantage and one disadvantage of LLC, Advantage of LLC - Limited liability provide option for owners to control how the business is run, Disadvantage of LLC - Due to legal filings, starting up a limited liability company may prove expensive, Explain the business ownership structure, cooperative. For example, there is no limitation on the number of shareholders an LLC can have, unlike an S corporation, which has a limit of 100 shareholders. The decisions involved impact daily operations, taxation, and the level of risk. Not only will this decision have an impact on how much you pay in taxes, but it will affect the amount of paperwork your business is required to do, the personal liability you face and your ability to raise money. Create flashcards in notes completely automatically. Factors that determines business ownership are -, Give one advantage and one disadvantage of PLC, Advantage of PLC - Capital can be easily generated through trading shares publicly, Disadvantage of PLC - Anyone who can afford to buy shares can be a shareholder. Corporations are formed under the laws of each state with its own set of regulations. Partners can be held liable for the actions of other partners. Identify your study strength and weaknesses. 714 0 obj
<>
endobj
Generally they are safer decisions to start up based on an already proven business model, proven product, advertising done by corporate, and limited liability. What is the firms 2016 EVA? Free access to premium services like Tuneln, Mubi and more. After all of these changes, what will be the difference in the required returns for HRI and LRI? Private limited companies provide limited liability to their shareholders. That's because an S corporation has some appealing tax benefits and still provides business owners with the liability protection of a corporation. Non-profit organisations are exempt from paying corporate income tax if they meet the necessary criteria. I understand that the data I am submitting will be used to provide me with the above-described products and/or services and communications in connection therewith. It gives the owner the legal right to make certain business decisions. You use Schedule SE to calculate how much self-employment tax you owe. \text{Retained earnings} & \text{57.605} & \text{38.774}\\ \begin{matrix} In conclusion, there are six business ownership structures, each with its own advantages and disadvantages. The long-term outcomes of a leveraged buyout are higher performance and higher risk. In choosing a business structure best suited to your business, the following factors should be considered: The cost of setting up a business increases proportionally to the amount of legal paperwork. Explain. Corporations also continue indefinitely, even if one of the shareholders dies, sells the shares or becomes disabled. At tax time, the partnership must file a tax return (Form 1065) that reports its income and loss to the IRS. Raising funding for projects can be complicated. Earnings and losses pass through to the owners and are included on their personal tax returns. Sole proprietorships and certain types of partnerships face unlimited liability, meaning that the owners are personally liable for any debts the business incurs. Because each business form comes with different tax consequences, you will want to make your selection wisely and choose the structure that most closely matches your business's needs. Shares cannot be sold to the public (the current owners decide to whom they will sell them). Have all your study materials in one place. a disorganised blog on different study notes hoping that this will help others. Owners of the organisation are protected from personal liability. to students, Indiana University, Purdue University, Indianapolis BUS-Z 371, Lone Star College System, Woodlands PSYC 2314, Dedan Kimathi University of Technology ACC MISC. Thus, understanding the various types of ownership is essential to these folks. there is a separate legal personality between the shareholders and the business, the company is able to continue in the event of the death of a shareholder, the original owner of the company is often able to retain control of the business, raising capital can be done by the sale of shares to family, friends and employees, a private limited company has a greater status compared to an unincorporated business, there are legal formalities that are involved when establishing the business, capital cannot be raised by the sale of shares to the general public, it is quite difficult for shareholders to sell shares, there is less secrecy about the financial affairs that the company has compared to a sole trader and a partnership, there is a separate legal identity between the shareholders and the business, continuity (the company is able to continue in the death of a sole trader, ease of buying and selling shares for the shareholders, they have access to substantial capital sources since they have the ability to offer shares for sale to the general public, there are legal formalities needed when setting up this business, expensive - this is because there is a need to hire business consultants and financial advisers when creating such a company, share prices are subject to fluctuate due to reasons beyond the control of the owners, legal requirements concerning disclosure of information to shareholders and the public, there is a risk of takeover due to the availability of the shares on the stock exchange, directors influenced by short term objectives of major investors, fewer chances of the new business failing since the name of an established brand and product are being used, advice and training is offered by the franchiser, national advertising is being paid for by the franchiser, the supplies used in the franchise are obtained from quality checked suppliers, franchiser agrees not to open another branch in the local area, share of profits or revenue have to be paid to the franchiser each year, the initial franchise fee can be expensive to pay, local promotion still have to be paid for by the franchisee, no choice of supplies or suppliers to be used, there are strict rules over pricing and layout of the outlet reduces the franchisee's control over their own business, the costs and risks of a new business venture are shared - this is a major consideration when the cost of developing new products is rising rapidly, different companies might have different strengths and experiences and they therefore fit well together, they might have their major markets in different countries and they could exploit these with the new product more effectively than if they both decided to 'go it alone. What percentage of the companys capital structure consists of debt? Experts say this can hamper the company's ability to raise capital. What is the simplest business ownership structure? What are the 6 basic forms of business ownership? taxation- taxed on share of firms' earnings. Its 100% free. External view of a General Motors building, Wikimedia Commons. Meaning it can take loans, it can sue individuals or businesses, it is liable to its own debts. End of preview. \text{Total assets} & \text{\$ 311.824} & \text{\$ 252.670}\\ WP. hb```f``zsAb,=@nE!gFlb,7.kjhhy:[
q7wuuv The proprietor is bears responsibility for all business debt and losses, 2. Even after you settle on a business structure, remember that the circumstances that make one type of business organization favorable are always subject to changes in the laws. But opting out of some of these cookies may affect your browsing experience. I can advise you this service - www.HelpWriting.net Bought essay here. This business ownership structure means two or more people own a business. Sole Proprietorship involves a business being owned and directed by an individual. A limited partnership has both general and limited partners. Select all that apply. Partnerships are of two types, namely: General partnership - this involves an investment from all partners, and all partners bear the responsibility for any debt incurred by the business. \text{Inventories} & \text{38.444} & \text{34.982}\\ It can issue debt at $r_{d}=11 \%$, and its common stock currently pays a $2.00 dividend per share [math]\left(\mathrm{D}_{0}=\$ 2.00\right)[/math]. Can be run by a board of directors that does not see eye to eye with you as the owner, you do not have complete say in the direction of your company, can have double taxation, and roles within the company/structure can be confusing. \text{Total current liabilities} & \text{\$ 77.955} & \text{\$ 59.982}\\ Mr Pedro is a reliable loan officer.In the past, we have had experience with several other banks and have found the process frustrating and tedious. it is expensive to maintain the control of large numbers of subsidiary companies, the holding company may try to exploit the subsidiary company, managed with social objectives rather than solely with profit objectives, loss-making services might still be kept operating if the social benefit is great enough, finance raised is mainly from the government, tendency towards inefficiency due to the lack of strict profit targets, subsidies from government can also encourage inefficiencies. The ownership of the business is divided by shares in the company. The following companies are examples of types of business ownership.
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