Chapter 3_Form of the owership

Chapter 3_Form of the owership - Chapter 3: Forms of...

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Unformatted text preview: Chapter 3: Forms of Ownership & Franchising 1 Chapter 3: Forms of Ownership 1 Anup Chowdhury, Lecturer, BBS, BU Forms of Ownership Chapter 3: Forms of Ownership 2 Anup Chowdhury, Lecturer, BBS, BU Factors Affecting the Choice ¡ Business goals ¡ Tax considerations ¡ Liability exposure ¡ Start-up capital requirements ¡ Control ¡ Management succession plans ¡ Cost of formation Chapter 3: Forms of Ownership 3 Anup Chowdhury, Lecturer, BBS, BU Impact of Forms of Ownership Chapter 3: Forms of Ownership 4 Anup Chowdhury, Lecturer, BBS, BU Major Forms of Ownership ¡ Sole Proprietorship ¡ Partnership ¡ Corporation ¡ S Corporation ¡ Limited Liability Company ¡ Joint Venture Chapter 3: Forms of Ownership 5 Anup Chowdhury, Lecturer, BBS, BU Advantages of the Sole Proprietorship ¡ Simple to create ¡ Least costly form to begin ¡ Profit incentive ¡ Total decision making authority ¡ No special legal restrictions ¡ Easy to discontinue Chapter 3: Forms of Ownership 6 Anup Chowdhury, Lecturer, BBS, BU Disadvantages of the Sole Proprietorship ¡ Unlimited personal liability ¡ Limited skills and capabilities ¡ Feeling of isolation ¡ Limited access to capital ¡ Lack of continuity Chapter 3: Forms of Ownership & Franchising 2 Chapter 3: Forms of Ownership 7 Anup Chowdhury, Lecturer, BBS, BU Ownership Requirements One owner Tax Treatment Income and losses “ pass through ” to owner and are taxed at personal rates Liability Unlimited personal liability Chapter 3: Forms of Ownership 8 Anup Chowdhury, Lecturer, BBS, BU Advantages ¡ Low start-up costs ¡ Freedom from most regulations ¡ Owner has direct control ¡ Al profits go to owner ¡ Easy to go out of business if necessary Drawbacks ¡ Unlimited personal liability ¡ Personal finances at risk ¡ Miss out on all kinds of business tax deductions ¡ Total responsibility ¡ May be more difficult to raise financing Chapter 3: Forms of Ownership 9 Anup Chowdhury, Lecturer, BBS, BU Advantages of the Partnership ¢ Easy to establish ¢ Complementary skills of partners ¢ Division of profits ¢ Larger pool of capital ¢ Ability to attract limited partners ¢ Little government regulation ¢ Flexibility ¢ Taxation Chapter 3: Forms of Ownership 10 Anup Chowdhury, Lecturer, BBS, BU Disadvantages of the Partnership ¢ Unlimited liability of at least one partner ¢ Capital accumulation ¢ Difficulty in disposing of partnership interest ¢ Lack of continuity ¢ Potential for personality and authority conflicts Chapter 3: Forms of Ownership 11 Anup Chowdhury, Lecturer, BBS, BU Types of Partners ¢ General partners £ Take an active role in managing a business. £ Have unlimited liability for the partnership’s debts....
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This note was uploaded on 04/24/2011 for the course BUS 321 taught by Professor Sanaulmostafa during the Spring '09 term at BRAC University.

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Chapter 3_Form of the owership - Chapter 3: Forms of...

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