There are various types of business ownership. A sole proprietorship is owned and operated by one person. While sole proprietorships are easy to set up and offer great operating flexibility, the owner remains personally liable for all of the firm’s debts and legal settlements. In a partnership, two or more individuals share responsibility for owning and running the business. Partnerships are relatively easy to set up, but they do not offer protection from liability. When a business is set up as a corporation, it becomes a separate legal entity. Investors receive shares of stock in the firm. Owners have no legal and financial liability beyond their individual investments. In an employee-owned business, most stockholders are also employees. Family-owned businesses may be structured legally in any of these three ways but face unique challenges, including succession and complex relationships. The legal structure of a not-for-profit corporation stipulates that its goals do not include earning a profit.
In a corporation, the company’s assets and liabilities are separate from those of its owner(s). Advantages include limited financial liability for owners; they lose only the money they have invested. Furthermore, there are expanded financial capabilities such as stock sales and internal fund transfers. A major disadvantage is double taxation of corporate earnings. To avoid double taxation of corporate earnings, an S corporation can pay federal income taxes as partnerships while retaining the liability limitations of corporations. Limited liability companies (LLCs) have the corporate advantage of limited liability while avoiding the double taxation.
There are three types of corporations: domestic, foreign, and alien. Stockholders, or shareholders, own a corporation. In return for their financial investments, they receive shares of stock in the company. Stockholders elect a board of directors, who set overall policy. The board hires the chief executive officer (CEO), who then hires managers.
Public ownership occurs when a unit or agency of government owns and operates an organization. Collective ownership establishes an organization referred to as a cooperative, whose owners join forces to operate all or part of the functions in their firm or industry.
A franchisor is a large firm that permits a small-business owner (franchisee) to market and sell its products under its brand name, in return for a fee. Benefits to the franchisor include opportunities for expansion and greater profits. Benefits to the franchisee include name recognition, quick start-up, support from the franchisor, and the freedom of small-business ownership.
Lastly, in a merger, two or more firms combine to form one company. A vertical merger combines firms operating at different levels in the production and marketing process. A horizontal merger joins firms in the same industry. A conglomerate merger combines unrelated firms. An acquisition occurs when one firm purchases another. A joint venture is a partnership between companies formed for a specific undertaking.
In a corporation, the company’s assets and liabilities are separate from those of its owner(s). Advantages include limited financial liability for owners; they lose only the money they have invested. Furthermore, there are expanded financial capabilities such as stock sales and internal fund transfers. A major disadvantage is double taxation of corporate earnings. To avoid double taxation of corporate earnings, an S corporation can pay federal income taxes as partnerships while retaining the liability limitations of corporations. Limited liability companies (LLCs) have the corporate advantage of limited liability while avoiding the double taxation.
There are three types of corporations: domestic, foreign, and alien. Stockholders, or shareholders, own a corporation. In return for their financial investments, they receive shares of stock in the company. Stockholders elect a board of directors, who set overall policy. The board hires the chief executive officer (CEO), who then hires managers.
Public ownership occurs when a unit or agency of government owns and operates an organization. Collective ownership establishes an organization referred to as a cooperative, whose owners join forces to operate all or part of the functions in their firm or industry.
A franchisor is a large firm that permits a small-business owner (franchisee) to market and sell its products under its brand name, in return for a fee. Benefits to the franchisor include opportunities for expansion and greater profits. Benefits to the franchisee include name recognition, quick start-up, support from the franchisor, and the freedom of small-business ownership.
Lastly, in a merger, two or more firms combine to form one company. A vertical merger combines firms operating at different levels in the production and marketing process. A horizontal merger joins firms in the same industry. A conglomerate merger combines unrelated firms. An acquisition occurs when one firm purchases another. A joint venture is a partnership between companies formed for a specific undertaking.
