Taking Care of Business Select Forms of Business
Taking Care of Business Select Forms of Business Ownership Business Law LAP 2
Objectives Summarize the advantages and disadvantages of the most common types of business ownership. Demonstrate procedures for selecting a form of business ownership.
Objective Summarize the advantages and disadvantages of the most common types of business ownership.
• Google, Starbucks, Coca-Cola, Nike, Mc. Donald’s, Sony, Disney • A few of the most famous companies in the world
• They started out small. • They changed ownership structure as they grew.
• You might own your own business someday. • You’ll need to know which ownership option best suits your needs and goals.
Weigh Your Options • Ownership options include: Ø Sole proprietorship Ø Partnership (general and limited) Ø Corporation Ø Hybrid
Weigh Your Options • Know the pros and cons of each option. • Your choice affects taxation and government involvement.
Sole Proprietorship • Advantages: Ø Control Ø Flexibility Ø Ease of opening Ø Owner retention of all profits
Sole Proprietorship • Advantages: Ø Privacy Ø Ability to act quickly in making decisions Ø Tax advantages Ø Easy to close
Sole Proprietorship • Disadvantages: Ø Unlimited liability Ø Limited capital Ø Limited capabilities Ø Uncertain life
Partnerships • Advantages: Ø Ease of start-up Ø Combined resources Ø Decreased competition Ø Reduced expenses Ø Tax advantages
Partnerships • Disadvantages: Ø Unlimited liability Ø Limited capital Ø Disagreements Ø Difficulty in ending Ø Uncertain life/transferability
Corporations • Advantages: Ø Limited liability Ø Financial power Ø Unlimited life Ø Easy-to-transfer ownership Ø Skilled personnel
Corporations • Disadvantages: Ø Difficulty in forming and operating Ø More complex requirements Ø Dual taxation Ø Separate owners and managers
Hybrids • Advantages: Ø Limited liability Ø Taxation Ø Cost to start and operate Ø Flexibility Ø Combined resources Ø Life span
Hybrids • Disadvantages: Ø Relatively few Ø No universal guidelines
Objective Demonstrate procedures for selecting a form of business ownership.
Steps for Selecting a Form of Ownership • Determine the nature of the business. • Assess your desired level of independence or control. • Evaluate financial needs. • Examine willingness to assume risk. • Analyze your experience and abilities.
Steps for Selecting a Form of Ownership • Implement steps to legalize the business. Ø Take care of any copyrights, trademarks, or patents. Ø Obtain any necessary permits or certifications.
Steps for Establishing a Sole Proprietorship • Complete “Doing Business As” (DBA) form. • Pay registration fee(s). • Meet any health/safety requirements.
Steps for Establishing a Partnership • Verify certification; obtain permits; pay registration fees. • Make sure each partner understands his/her rights and responsibilities.
Steps for Establishing a Partnership • Have a partnership agreement (optional in general partnerships). • File a partnership agreement to operate a limited partnership. • Consult an attorney to develop the agreement.
Steps for Establishing a Corporation • Obtain the services of an attorney. • File for a charter with the state in which the business is located. • File “Articles of Incorporation, ” if required. • Pay incorporation fees.
Steps for Establishing a Hybrid • Register with the state in which the business is located. • Pay necessary initial and annual fees. • File an operating agreement as the state requires.
Steps for Establishing a Hybrid • Obtain filing procedures and details from your local government. • Obtain legal advice, if needed.
• Rhiannon’s sole proprietorship • She wants to incorporate—but doesn’t want to lose control.
• She chooses distant friends and family for her board of directors. • Is this ethical? • What do you think?
MBAResearch Acknowledgments Original Developers Christopher C. Burke, Sarah Bartlett Borich, MBAResearch Version 1. 0 Copyright © 2011 MBA Research and Curriculum Center®
Digital-based photography sources: HEMERA PHOTO OBJECTS Obj. B: #busiwri 2 Photos copyright Hemera technologies Inc. , 1997 -2000 P. O. Box 79092 Hull, Quebec, Canada J 8 Y 6 V 2
Copyright: All photographic digital images on this CD are owned by the aforementioned photographic resources or their licensors and are protected by the United States copyright laws, international treaty provisions, and applicable laws. No title to or intellectual property rights to the images on this CD are transferred to you. These sources retain all rights and are not to be used, digitally copied, transferred, or manipulated in any way. To do so is a violation of federal copyright laws.
- Slides: 32