Introduction to Management—CH02.pptVIP

Forms of Business Ownership Chapter 2 Select a form of business ownership Methods of owning existing businesses How business owners can measure their business performance Objectives There are three types of business organizations Proprietorship Partnership Corporation A proprietorship is owned by one individual. Advantages Ease in organizing Possess all earnings Complete control Low taxes Disadvantage Limited funds Unlimited liability Limited skills Risks on all losses Joe’s A partnership is owned by two or more individuals. Advantages More funds Shared losses More specialization Disadvantage Unlimited liability Shared control Shared profits Joe and Marty’s Some limited partners Partners’ liability limited to cash or property they contributed to the partnership They are only investors, not participate in management Share profits or losses Limited partnership One or more general partners Manage business Receive a salary Share the profits or losses Have unlimited liability Limited partnership Seventy-five or fewer Earnings distributed to the owners Taxed at personal income tax rate of each owner Limited liability S-corporation A type of general partnership General partnership Limited liability Limited Liability Company (LLC) A corporation is organized under state or federal statutes as a separate legal entity. Advantage Limited liability More access to funds Easy transfer of ownership Disadvantage High organizational fees Financial disclosure Double taxation. Agency problem J M, Inc. Dividends Increase on the value of the stock How stockholders earn Privately held: ownership restricted to a small group of investors Publicly held: Shares can be easily purchased or sold by investors Assume ownership of a family business Purchase an existing business Franchising --- use trademark, trade name, copyright under specified conditions Own existing businesses Franchise Advantage disadvantages Proven management style less risk Name recognition Financial s