types of ownership

8/7/2019 types of ownership

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There are three types of

Ownership

ySole proprietorshipyPartnership

yCorporation


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A sole proprietorship

or single proprietorship, is a business owned by

one person. No legal requirements must be metin order to start this form of business, other than

to file for a business license and register abusiness name.


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y OneOwner

y Separate entity for accountingpurposes

y Not a separate legal entity fromthe owner

y Unlimited liability

y Limited life

y Owner taxed on profits

Sole Proprietorship


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A proprietorshipis owned by one

individual.

Advantages Ease in organizing

Low cost of

organizingDisadvantage

Limited source of

financial resources Unlimited liability

Joes


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A partnership

Is owned by two or more persons called partners.

Like a proprietorship, no special legalrequirements must be met in order to start a

partnership, other than to register the businessname and obtain a business license.


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y Two or more owners

y Separate entity foraccounting purposes

y

Not a separate legal entityfrom the owners

y Unlimited liability

y Limited life

y Owners taxed on profits

Partnerships


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A partnership isowned by two or

more individuals.

Advantages

More financialresources than a

proprietorship.

Additionalmanagement skills.

Disadvantage

Unlimited liability.

Joe and Martys


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A corporation

Is a business that is a separate legal entity

chartered (or incorporated) under provincialand federal laws. A corporation is responsible

for its own acts and its own debts.


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One or more owners

Separate entity foraccounting purposes

Separate legal entity fromthe owner(s)

Limited liability

Unlimited life

Corporation taxed onprofits

Corporations


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Not-for-profit andgovernmentorganizations

No identifiable owner

Examples: schools,charities, libraries,hospitals, police, shelters

Corporations


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A corporation is

organized under stateor federal statutes as a

separate legal entity.

Advantage The ability to obtain

large amounts of

resources by issuingstocks.

Disadvantage

Double taxation.

J & M, Inc.


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Non-Business Organizations

Is not for profit, no specific owner (usually a

board of directors)


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Internal

Owners, Managers

External

Bankers and other creditors,

investors and potentialinvestors, unions, externalauditors

Users of Accounting InfoUsers of Accounting Info


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A business stakeholderis a person or

entity having an interest in theeconomic performance of the business.

Business StakeholdersBusiness Stakeholders


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2

Assessstakeholders

informational

needs.

The Process of ProvidingThe Process of Providing

InformationInformationSTAKEHOLDERS

Internal:

Owners,

managers,employees

External:

Customers,

creditors,government1

Identify

stake-holders.


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Accounting

Information

System

Design the

accountinginformation

system to meet

stakeholders

needs.

34

Record

economic

data about

business

activities

and events.

The Process of ProvidingThe Process of Providing

InformationInformation


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5

Prepare

accounting

reports forstakeholders.

STAKEHOLDERSInternal:

Owners,

managers,employees

External:

Customers,

creditors,government

Accounting

Information

System

The Process ofThe Process of

Providing InformationProviding Information


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P

rofession ofAccountingP

rofession ofAccounting

Accountants employed by a business firm or

a not-for-profit organization are said to beengaged in private accounting.

Accountants and their staff who provide

services on a fee basis are said to be

employed in public accounting.


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TheAccounting EquationTheAccounting Equation

Assets = Liabilities + Owners Equity

The resourcesThe resources

owned by aowned by a

businessbusiness


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The rights of theThe rights of the

creditors, whichcreditors, which

represent debtsrepresent debtsof the businessof the business


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The rights of theThe rights of the

ownersowners


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What is a business

transaction?

A business transaction is an economic event orcondition that directly changes an entitys financial

condition or directly affects its results of operations.


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THANK

YOU

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