Understanding Business Chapter 5

Understanding Business Chapter 5 - Understanding Business...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Understanding Business Chapter 5 (Choosing a Form of Business Ownership) 3 ways to form a business: 1. Sole proprietorship – business that is owned and managed by the same person 2. Partnership – legal form of business with two or more owners 3. Corporation – legal entity with authority to act and have liability separate from its owners Advantages of sole proprietorship: Ease of starting and ending business – buy equipment and announce you are in business Being your own boss Pride of ownership Leaving a legacy Retention of company profit Disadvantages of sole proprietorship: Unlimited liability – risk of personal loss o Unlimited liability – responsibility of business owners for all debts of the business Limited financial resources – funds limited to one that sole owner can gather Management difficulties – difficult to attract qualified employees to run business Overwhelming time commitment – hard to own, manage, train people and have time for everything else Few fringe benefits – no paid health insurance, disability insurance, vacation pay Limited growth – expansion relies on owner for creativity, business know –how…. Limited life span – ends with sole proprietor Several types of partnerships General partnership – all owners share in operating the business and in assuming liability for the business’s debts Limited partnership – one or more general partners and one or more limited partners o General partner – owner who has unlimited liability and is active in managing the firm o Limited partner – owner who invests money in the business but doesn’t have management responsibility or liability for losses beyond the investment o Limited liability – limited partners aren’t responsible for debts of the business
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 3

Understanding Business Chapter 5 - Understanding Business...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online