ch13 - BUSINESS ORGANIZATIONS Chapter 13 Chapter Issues...

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BUSINESS ORGANIZATIONS Chapter 13
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Chapter Issues Major forms of business organizations How businesses are created Factors that may influence a  business’s choice of its type of  organization Alternative business forms to apply to  various circumstances
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Corporate Characteristics Limited Liability  – Owners can lose only  their investments; Continuity of Existence  – Entity exists  independent of the owners; Free Transferability of Interest  – Owner  may transfer interest w/o affecting entity; Centralized Management  – Ownership  and management are separate Double Taxation Ease of Raising Money
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Sole Proprietorship Sole Proprietorship A person doing business for himself/herself Usually the proprietor owns all of the business property NO CM: Responsible for management-Owner is management;  Responsible for control of the business  NO LL:Personally Responsible for liabilities – Creditors may  go after personal, non-business assets for payment.  NO FT: Sale of business stops business. NO CE:  If SP dies, business dies. May hire agents--liable for them as well Capital must come from the owner’s own resources or is  borrowed, with owner personally liable . Profits from the business are taxed personally  to the proprietor Record keeping formalities are at the owner’s discretion
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Corporate Char. - Sole Prop. NO … Limited Liability  – Owners can lose only  their investments;  Continuity of Existence  – Entity exists  independent of the owners;  Free Transferability of Interest  – Owner  may transfer interest w/o affecting entity; Centralized Management  – Ownership  and management are separate Double Taxation Ease of Raising Money
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General Partnership Definition:  An association  of two or more persons to  carry on business as co- owners for a profit Partners   control the  Each of the partners has a  fiduciary duty   to the other  partner(s) Under most state laws, a  partnership may be sued as  an entity Most states have adopted  the Uniform Partnership Act  (UPA) No need to enter into a  formal agreement for a  partnership to exist at law However, agreements are  preferable, esp. regarding  finances, management and  dissolution issues If the Partnership  Agreement is silent, the UPA  governs If the agreement does not  state otherwise, the profits  of the partnership are  divided equally
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Partnerships (cont) All partners are liable for all p’ship debts.
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ch13 - BUSINESS ORGANIZATIONS Chapter 13 Chapter Issues...

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