1 chapter 7 business ownership and organization 9/12/2015 © ©1999 south-western college publishing
TRANSCRIPT
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Chapter 7Chapter 7Chapter 7Chapter 7Business Ownership Business Ownership
and Organizationand Organization
04/19/23
©©1999 South-Western College Publishing
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Legal Forms of BusinessLegal Forms of Business
ProprietorshipsPartnershipsCorporations
Forms of Business Organizations Exhibit 1
Forms of Business Organizations Exhibit 1
Proprietorships(74.0%)
Partnerships(7.4%)
Corporations(18.6%)
PERCENTAGE OF U.S. FIRMS
Proprietorships(6.0%)
Partnerships(4.4%)
Corporations(89.7%)
PERCENTAGE OF TOTAL BUSINESS RECEIPTS
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What is the simplest business form?
What is the simplest business form?
Sole Proprietorship
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What is aSole Proprietorship?
What is aSole Proprietorship?
A firm owned by one person who alone bears the responsibility and unlimited liability of the firm
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How do I establish aSole Proprietorship?How do I establish aSole Proprietorship?
• Be able to show that you are attempting to make a profit
• Give your business a name• File Schedule C with taxes
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What are the advantages of a Sole Proprietorship?What are the advantages of a Sole Proprietorship?
• Simplicity and ease of organization• Can work it part time• Total control over decisions• Work with family members• Little government regulation
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What are the disadvantages of a Sole Proprietorship?
What are the disadvantages of a Sole Proprietorship?
• The proprietor & the firm are legally inseparable
• Proprietor has unlimited liability• Limited funds for expansion• Limited life• Benefits of specialization not
realized
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What isUnlimited Liability?
What isUnlimited Liability?
The owners personal wealth is subject to appropriation to pay off the firm’s debt
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What is a Partnership?What is a Partnership?
A firm owned by two or more persons who each bear the responsibilities and unlimited liabilities
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What are the advantages to a Partnership?
What are the advantages to a Partnership?
• Ease of organization• Shared financial support• Greater specialization possible• Limited regulation
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What are the disadvantages of a Partnership?
What are the disadvantages of a Partnership?
• Disagreements • All partners 100% liable• Partners legally inseparable from the
business• Death of a partner ends the agreement
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Want to go into your own business?
Want to go into your own business?
http://www.sba.govhttp://www.inc.com
http://www.sbaer.uca.edu/http://www.isquare.com
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What is a Corporation?What is a Corporation?
A firm whose legal identity is separate from the people who own shares of stock
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What are the advantages of a Corporation?
What are the advantages of a Corporation?
• It is a separate legal being from its owners, giving owners limited liability
• Permanent entity• Benefits of specialization• Easier to raise funds for expansion
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What is a Stock?What is a Stock?Ownership in a corporation
represented by shares that are claims on the firm’s assets and earnings
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Who is a Stockholder?Who is a Stockholder?A person owning at least
one share of stock in a corporation
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What is an advantage of selling stock?
What is an advantage of selling stock?
The money never need be paid back
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What is the disadvantage of selling stock?
What is the disadvantage of selling stock?
The original owners can lose control over the corporation if too much stock is sold
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What is a Dividend?What is a Dividend?That part of a
corporation’s net income that is paid out to its stockholders
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What is Common Stock?What is Common Stock?Stockholders can vote
according to their share of outstanding stock
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How does Preferred Stock differ from Common Stock?
How does Preferred Stock differ from Common Stock?
1. It does not carry voting privileges
2. Dividend yield is fixed3. First claim on dividends
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Find out more about investing!
Find out more about investing!
http://www.etrade.comhttp://www.morningstar.net
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What is aCorporate Bond?
What is aCorporate Bond?A corporate IOU
specifying loan duration and the interest rate
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What is the advantage of selling bonds?
What is the advantage of selling bonds?
Because no ownership comes with the bond the corporation runs no risk of losing control
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What is the disadvantage of selling bonds?
What is the disadvantage of selling bonds?
The money borrowed has to be paid back
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What are the downsides to a Corporation?
What are the downsides to a Corporation?
• Harder to organize• Double taxation • More government regulation• Separation of ownership and
management
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• What is a Sole Proprietorship?• What is a Partnership?• What is a Corporation?• What is a Stock?• What is a Dividend?• What is a Corporate Bond?• What is a Hostile Takeover?