revised ownership slides 2009 posted Nov 4 2009

revised ownership slides 2009 posted Nov 4 2009 -...

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Traditional Forms of Business Ownership Sole Proprietorship business owned by one person - sole proprietor Partnership business owned by two or more people - partners Corporation separate business entity owned by shareholders
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Which form is the most common? 74% 9% 17% Sole Prop. Partnership Corporation
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BUT… which has the largest sales? 9% 4% 87% Sole Prop. Partnership Corporation
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Sole Proprietorships Advantages Easy to form/Easy to Dissolve Owner has sole claim on all profits and must bear all losses…therefore maximum levels of incentive High levels of freedom and personal satisfaction Speed of decision making
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Tax advantage…losses can be written off against other sources of personal income Maximum levels of secrecy…no need to publicly disclose financial statements Disadvantages Unlimited Liability of Owner Lack of Continuity in the event of the death or long term illness of the owner Difficulty raising capital
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Management Limitations Tax Disadvantages…taxed on the basis of personal rates that are higher than the small business rate charged to private corporations
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Partnerships All partnerships are created by agreement This agreement can be either verbal or written (highly advisable) A partnership agreement is a written, legal document designed to prevent future misunderstanding and ill will between partners Outlines the rights and responsibilities of all partners
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Outlines how certain issues will be handled and resolved Typical Contents: Names of partners Type of partner…general or limited Amount of financial contribution How profits will be divided Procedures for adding a new partner Procedures for withdrawing one’s investment
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Types of Partners General Partner
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revised ownership slides 2009 posted Nov 4 2009 -...

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