Chapter 5 + 6 - Chapter 5 Forms of Business Ownership Three...

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Chapter 5 Forms of Business Ownership Three major forms of ownership (Tony Conza and Blimpie's, Richard Sears, Dad's Store), plus a 4th: 1. Sole Proprietorship (largest in #'s: 70%) 2. Partnership 3. Corporation (largest in sales $: 70%) 4. Cooperative Advantages/Disadvantages: Sole Proprietorship (one owner): + being own boss, pride of ownership, keeping profits + ease of starting and ending + personal tax treatment (-) unlimited liability (-) limited financial resources, life span, future growth (-) overwhelming personal commitment Partnership (two or more owners): + more financial resources + shared management and pooled knowledge + longer survival (-) unlimited liability (still) (-) division of profits (-) disagreements among partners (-) difficult to terminate Types of partnerships: 1. general partnership: partners completely share management of a business 2. limited partnership: at least one limited partner (liability is limited, but can't operate business) Corporations: + more money for investment and growth + limited liability + separation of ownership (stockholders) and control (management) +/- size, perpetual life (legal entity) +/- ease of transfer of ownership (-) initial cost (-) paperwork, two tax returns (-) difficult to terminate (-) double taxation S Corporations and LLCs (see fig 5.2 comparison) Public (stock sold on secondary mkt) vs. Private (stock held internally) Corporations Additional terms: articles of incorporation, bylaws common vs. preferred stock board of directors chief executive officer (CEO)
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