forms of business ownership.pptx

forms of business ownership.

1. Forms of Business Ownership

2. Forms of Business Ownership There are different types in which Business Ownership exist. Each form has its own advantages and disadvantages. Entrepreneurs need to understand the various types of businesses ownership so that they can choose the one that best suits their needs .

3. Forms of Business Ownership There are Three main forms of business ownership, which are; Sole proprietorship, Partnership, and Corporation Also Cooperatives, and Franchises are among the other common forms

4. Sole proprietorships Is a business owned and managed by One Individual Also known as Sole Trader Sole trader can employ some people but they will not be involved in the control of business the business and the owner are one and the same in the eyes of the law

5. Sole proprietorships

6. Sole Proprietorship Advantages Easy to start up Ease of management Owner keeps the profits Owner does not have to pay separate business income tax Psychological satisfaction Easy to discontinue

7. Sole Proprietorship Disadvantages Unlimited liability Limited access to raising financial capital Small size-may have limited inventory Limited managerial experience Difficulty of attracting qualified employees Limited life

8. Partnership Is a business owned by two or more people who share its risks and rewards Usually 2 to 20 partners, not more than twenty, persons Partners legally share a business assets, liabilities, and profits according to the terms of a Partnership Agreement

9. Partnership Agreement The partnership agreement is a legal document that states all of the terms of operating the partnership for the protection of each partner involved Such an agreement can specify the right and obligation of each partner Banks often want to review the partnership agreement before lending the business money

10. Contents of Partnership Agreement Percentages of ownership and distribution of profits and losses Description of management powers and duties of each partner Term (length) of the partnership How the partnership can be terminated How a partner can buy his/her share of the partnership.

11. Characteristics of Partnerships Agreement: there should be agreement to form a partnership. ( persons who are not competent to contract cannot be partners ) There must be a business: the agreement executed by persons should relate to a business, and such business should be lawful .

12. Characteristics of Partnerships Sharing the profits and losses : the profits or losses of business must be clarified as per the agreement Participation in business: business should be carried by all or any one of the partners.

13. Types of Partnerships General Partnership A partnership in which all partners have unlimited personal liability and take full responsibility for the management of the business Limited Partnership A partnership in which one or more of partners are limited liability to only their investment

14. Types of Partnerships Other types of partnership include; Joint Venture A partnership in which two or more companies joint together to complete specific project, then the partnership end after specified period of time Strategic Alliance A partnership in which two or more business work together for mutual benefit.

15. Partnership Advantages Ease of start up Ease of management Lack of special taxes on partnership’s income Larger pool of capital Ability to attract limited partners More efficient operations that come from larger size

16. Partnership Disadvantages Difficult of finding partner Divided Authority Possible conflict among partners Lack of trust and confidence Risk of joint responsibilities Unlimited liability

17. Corporation Is a Company that is registered by a state and operates apart from its owners. In a corporation, the owners of the business are protected from liability for the actions of the company. To form a corporation, the owners must get a corporate charter from the state

18. Corporate Charter The corporate charter/certificate should show; Name Place of business Statement of purpose Time horizon Names and addresses of incorporators Capital required at time of incorporation Restrictions on transferring shares By-laws

19. Corporate Structure

20. Corporations Advantages Ease of raising financial capital Limited liability for its owners Board of directors can hire professional managers to run the firm Unlimited life Ease of transferring ownership of the corporation

21. Corporations Disadvantages Double taxation of corporate profits Difficulty and expense of getting a charter Shareholders ( owners) have little voice in how the business is run Subject to more government regulations than others forms of business

22. Franchises a contractual agreement to use the name and sell the products or services of a company in a designated geographic area Franchising is a form of business organization in which a firm that already has a successful product or service (franchisor) licenses its trademark and method of doing business to another business or individual (franchisee) in exchange for a franchise fee and an ongoing royalty payment

23. Components of Franchise Business Franchisor- actual owner of the business that lets other investors rent or lease its name, business profile, and way of doing business Franchisee- investor who rents or leases the business model from the franchisor and then hope to recoup his/her investments by selling the franchisor’s goods or service

24. Advantages of Franchise A proven product or service within an established market. An established trademark or business system. Franchisor’s training, technical support, and managerial expertise. An established marketing network . Availability of financing (varies). Potential for business growth

25. Disadvantages of Franchise Cost of the franchise. Restrictions on creativity. Duration and nature of commitment. Risk of fraud, misunderstandings, or of franchisor commitment. Poor performance on the part of other franchisees. Potential for failure

26. cooperative Is an organization that is owned and operated by its members A cooperative is a separate legal entity from the members, directors, and employees. These parties are not liable for the entity’s debts Each cooperative member has equal voting rights, regardless of the number of shares they own or their role in the organization

27. Advantages of Cooperatives Suitable for poor people Simple to form Limited liability Democratic management Tax Concession No Exploitation

28. Disadvantages of Cooperatives Limited Capital Inefficient management Lack of secrecy Excessive stage regulations Internal conflicts

29. Which type of business ownership is appropriate in your environment?

30. End