Sole proprietorship
It is a business owned and operated by one
person. The owner is responsible for all operation and assumes all the risk.
Advantages
-
Owner
makes all decisions
-
Owner
is his own boss
-
All
financial information can be kept secret
-
This
type of business is easy to start and close.
Disadvantages
-
Owner
has responsibility for all debts
-
Unlimited
personal liability: owner is responsible for paying all debts and liabilities
-
Cost
and time commitment be high
-
Funding
can be difficult to obtain
-
Owner
does not have fringe benefits
-
Higher
taxation rate than corporate rate
Partnership
It is a form of business organization in which
two or more people own and operate the business together.
Advantages
-
Partner
co-own the business
-
They
share responsibilities
-
They
may have greater financial resources than sole proprietors
-
They
share business losses
-
They
share time committed
Disadvantages
-
Partner
have unlimited personal liability for all the other partners:
o
Joint
and several
§ Joint: all are responsible
§ Several: if one defaults, the other
may have to pay
-
They
may have conflicts
-
Profits
are shared
-
Partnerships
are more difficult to close down than sole proprietorships
o
Death,
mental capacity, bankrupt, breach of partnership
-
Agents
of the business can negotiate on behalf of other partners conducting business
Corporation
It is a legal entity that exists independently
of its owners.
-
Owners
= shareholders
-
Articles
of incorporation:
o
AGM:
annual general meeting
§ Proxy voting
-
Owners
paid:
o
Share
value
o Dividend: an amount pay to
shareholders from company’s members
Pyramid of powers
-
Owners
/ shareholders: elect board of directors
o
Board
of directors: hire officers
§ Officers: set corporate objective
and select managers
· Managers: supervise employees
o
Employees
Types of co-ops
Private
|
Public
|
Crown
|
Non - profit
|
Up to 50 shareholders
|
Unlimited shareholders
|
Owner by governments
|
Undertake fundraising
|
Shares are not offered to the public
|
Share are offered to general public
|
Provide a special service to the public
|
Do research
|
May only be a single person
|
Stock exchanges
|
Taxpayers may have to pay more taxes if business is
not profitable
|
Help people
|
Advantages
-
The shareholders have limited
liability for the debts of the corporation and share the profits
o A group is responsible for paying all the debts or liabilities. It
is safer
-
Usually
shareholders do not operate the company. They elect the board of directors, who
hire officers
-
Corporations
can usually raise funds more easily than sole proprietors or partners
-
Corporations
usually have a lower tax rate than private owners
-
A
corporation can continue to exist after death of its owners
Disadvantages
-
Corporations
have more complicated structures
-
Employees
who are not owners may not be committed to the business
-
Corporations
are soulless evil beast (maybe not, but profit is the higher motivation)
o
As
good or bad as their shareholders want them to be
-
Government
regulation
-
Corporation
must publish annual reports, which could give away important secrets to
competitors
-
The
value of company shares can change depending on change in the stock
Co-operative
It is a business owned and operated by a group
of people with a strong common interest.
-
Start
up costs are shared among the members of the co-op
-
Members
own and control the business and make all business decisions
Advantages
-
Members
own and control the business
-
Members
share the start up costs and the running of the business
-
Members
share the financial risk
-
Members
may pay less for goods and service and get more for those they shell
o
Patronage
returns
Disadvantages
-
Because each member only has one vote,
members may not want to invest money for expansion
-
Because
of the number of members, making decisions can be difficult
-
Members
may have conflicts
-
Individuals
can only do business with other members within the co-op in area relates to the
co-op
Franchise
It is a business in which a franchisor
sells to another person, called the franchisee, the rights to use the business
name and to sell a product and service in a given territory.
Advantages
-
Franchisees
buy a business with a good reputation
-
Franchisors
supply training and financial knowledge
-
Franchisors
usually provide packaging, advertising and equipment to the franchisee
Disadvantages
-
Franchises
can be expensive to buy
-
Franchisees
may have to follow a lot of rules laid down by the franchisors
-
If a
franchisor’s business fails, so will fail the franchisee’s business
