...Types of Company Ownership: There are three types of company ownerships recognized in this country; they include proprietorship, partnership, and corporation. Depending on an individual’s personal need or ambition, one can successfully establish a business suitable to their preference. Proprietorship: Proprietorship is when an individual has a business that is unincorporated. The U.S Small Business Administration mentioned that there is no differentiation between a business established by an individual and that person. Therefore, the owner is permitted to acquire and retain all profits made by their business, but they are also responsible for the business’ liabilities, losses, and debts (SBA.org). There are three advantages of being in a proprietorship: Ehrhardt and Brigham report, “(1) it is easily and inexpensively formed, (2) it is subject to few government regulations, and (3) its income is not subject to corporate taxation but is taxed as part of the proprietor’s personal income” (Pg. 5-6). Another advantage is that one has complete control over their business; they do not need to consult others for over decisions or any changes that need to be implemented. Even though there are benefits to having proprietorships, there are various limitations. First being the inability or difficulty owners of proprietorships encounter in the area of acquiring capital necessary for the expansion of the business. The second limitation is that “the proprietor has unlimited personal...
Words: 1106 - Pages: 5
...MEANING, CHARACTERISTICS AND TYPES OF A COMPANY INTRODUCTION Industrial has revolution led to the emergence of large scale business organizations. These organization require big investments and the risk involved is very high. Limited resources and unlimited liability of partners are two important limitations of partnerships of partnerships in undertaking big business. Joint Stock Company form of business organization has become extremely popular as it provides a solution to overcome the limitations of partnership business. The Multinational companies like Coca-Cola and, General Motors have their investors and customers spread throughout the world. The giant Indian Companies may include the names like Reliance, Talco Bajaj Auto, Infosys Technologies, Hindustan Lever Ltd., Ranbaxy Laboratories Ltd., and Larsen and Tubro etc. 1.2 MEANING OF COMPANY Section 3 (1) (i) of the Companies Act, 1956 defines a company as “a company formed and registered under this Act or an existing company”. Section 3(1) (ii) Of the act states that “an existing company means a company formed and registered under any of the previous companies laws”. This definition does not reveal the distinctive characteristics of a company . According to Chief Justice Marshall of USA, “A company is a person, artificial, invisible, intangible, and existing only in the contemplation of the law. Being a mere creature of law, it possesses only those properties which the character of its creation of its creation confers...
Words: 114216 - Pages: 457
...LIT 1 Task 1 PART A Sole Proprietorship Sole Proprietorship is a business owned by one person, as distinguished from a partnership or Corporation. Sole proprietorship is a company, which is not registered with the state as a limited liability company or corporation. Some advantages of a sole proprietorship are that they have flexibility in operations. The sole proprietorship business is undertaken on a small scale. If any change is required in the operations, it is easy and quick to bring the changes. Another advantage in this type is the ease of promptness in decision-making, autonomy. When the decision is to be taken by one person, it is guaranteed to be quick. Thus, the entrepreneur, as a sole proprietor, can arrive at quick decisions concerning the business because he does not have to ask anybody else. There is only one person that makes decisions, therefore, there is no other to criticize, or challenge a decision made. A third advantage is the simplicity of the business. Because of this, it is the most common type of business entity. The only difficulty of this business type is obtaining licenses and permits in the state of operation. If the business will be run under a different name than that of the individual who owns it, a separate special certificate must be filed. Sole Gain is seen as a highly ranked advantage because all revenue goes back to the single investor, the entrepreneur. There are no shareholders to declare dividends. The primary advantage for a...
Words: 1754 - Pages: 8
...development”. Contents: 1. Types of business entity 2.1. Explanation of each entity 2.2. Advantages and disadvantages of each type of entity 2.3. Objectives of each entity 2. Stakeholders 3.4. Definition of stakeholder 3.5. List of stakeholders of each entity 3.6. Interest of each stakeholders 3. Organizational structure 4.7. Comparison of two structures presented in the case study 4. Human Resource Management 5.8. The role of HR within the structures presented in case study 5.9. Different methods of HR functions has been delivered of each type of entity 5. Reference 1. Types of business entity In the attached case study we have examples of following business entity: * Section 1: Sole trader * Section 2: Partnership * Section 3: Company: Private Limited Company * Section 4: Public Limited Company Sole trader: Sole trader is an individual who is run his own business. It is a self-employed person who bears risks and losses and takes the profits and the benefits. Partnership: Partnership is type of entity which is organized and managed by at least two people and where all profits and debts are share between the partners. Private limited Company: Private limited is type of business entity which is run and managed by shareholders who has limited liability and shares are exchange privately. There are restrictions define by company regulations. Shareholders can sell...
Words: 1618 - Pages: 7
...Explaining Basic Accounting Concepts and Business Structures The Hierarchy of Generally Accepted Accounting Principles identifies the sources for the accounting standards and principles. These sources include “FASB Standards, Interpretations, and Staff Positions; APB Opinions; and AICPA Accounting Research Bulletins” (Kieso, Weygandt, & Warfield, 2007, p. 12). When companies prepare financial statements in accordance with GAAP, they sometimes run into situations in which some standards do not address a certain situation or two standards may conflict. Because of this the Statement of Accounting Standard Number (SAS) 69 established a hierarchy to follow. The hierarchy forms a kind of order for GAAP rules and procedures used in preparing financial statements. The hierarchy is made up of four categories that have a descending level of authority. For example, “Category A consists of the following principles: FASB Statements of Financial Accounting Standards, FASB Interpretations, APB Opinions, and AICPA Accounting Research Bulletins” (eNotes, 2011, para. 5). Because the categories are in descending order, category A would take precedence over the other three categories. The FASB identified certain qualities of accounting information that make it effective for making decision. For accounting information to be considered effective it should possess these four qualities: relevance, reliability, comparability, and consistency. The information should be relevant enough to...
Words: 651 - Pages: 3
...Pros & Cons of the Different Legal Structures There are three main types of firms, which include: sole proprietorship, partnerships, and corporations. When starting a business, it is very important to weigh out the pros and cons of each type to decide which type would be best suit your particular business. Each type has its advantages and disadvantages that need to be considered before deciding which would be best moving forward. I will discuss the advantages, disadvantages, and differences of each type of firm. First, there is a sole proprietorship. “A sole proprietorship is someone who owns an unincorporated business by himself or herself.” (IRS.gov, 2016) This type of firm is the easiest to set up and the simplest of the business structures. It is by far the most popular because of its advantages. Some of these advantages include: ease of formation, least amount of record keeping, minimal regularly controls, and advantage of double taxation. With these great advantages comes a huge disadvantage, which is, there is no legal distinction between the assets and liabilities of the business and those of its owner. In a sole proprietorship you may reap all the reward from financial benefits, but you are solely responsible for all business risks involved. In a sole proprietorship if the business fails then that one individual stands to lose all personal assets and other possessions. The second type of business is a partnership. “A partnership is a single business where two...
Words: 812 - Pages: 4
...reviewed your options regarding a business organization change for Lamond Manufacturing. The types of business organizations I considered during my evaluation were a sole proprietorship, which provides autonomy and ease in creation, but is risky because of unlimited liability. The general partnership, which allows owners the opportunity to do business together, however, it carries the same unlimited liability as the sole proprietorship. The C-corporation provides limited liability for its owners, although, it can be problematic to manage, with numerous requirements and ongoing management. The S-corporation, a corporation similar to C-corporation, however, after meeting the eligibility criteria, the S-corporation can elect to be treated as a partnership for tax purposes. And the limited liability company, which provides the most flexible...
Words: 452 - Pages: 2
...for Business Organizations LIT1 July 23, 2012 * * * * * * * * * * * * * There are different types of business organizational structures. These structures include sole proprietorship, general partnership, limited partnership, C-Corporations, and S-Corporations. These structures each have advantages and disadvantages, depending on the particular situation or desired effects the business owners may have. It is imperative that owners understand the differences so they can choose the best organizational structure that fits their business needs. * Sole Proprietorship * One of the most common, easiest, and cost-effective organizational structures is a sole proprietorship. This form consists of one owner, and does not have any distinction between the business and the owner. Although sole proprietorships may seem less complex, it has disadvantages as well. * Sole proprietorships have several advantages and disadvantages as listed: * Liability – Sole proprietorship does not differentiate between the business and the owner. Sole proprietorships are liable for all losses. If the company were to get sued, the owner’s personal assets would also be at risk. The owner must file as a business if they are using a fictitious name; even if a company files a doing business as, also known as DBA, there is no legal separation of assets * Income Taxes – The owner pays taxes on the profits made with their personal...
Words: 2312 - Pages: 10
...It can make it just with an issue of stocks. Another advantage is company’s ability to operate even if stakeholders leave the company. The main burden of corporation is “double taxation”, which takes substantial amount of profit from shareholders. The other disadvantage is complexity registration and its high costs. e. S-corporation: Is a form of an enterprise that can offer similar advantages as those stated above. Some of those advantages include tax savings, business expense tax credits, and independent operations regardless of the shareholder status or participation. With those advantages, come some disadvantages. A couple of those disadvantages are stricter operational processes and shareholder compensation requirements. • Liability: Like shareholders of C-corporation, shareholders of S-corporation also have the benefits of limited liability. If the corporation...
Words: 2571 - Pages: 11
...Business Formation: Choosing the Form that Fits Review Questions 1. Describe the basic features that distinguish the four basic forms of business ownership: sole proprietorships, general partnerships, C corporations, and limited liability companies. 2. Why do many entrepreneurs initially set up their businesses as sole proprietorships? Why do many successful entrepreneurs eventually decide to convert their sole proprietorship to some other form of ownership such as a corporation or LLC? 3. How do limited partnerships and limited liability partnerships differ from general partnerships and from each other? 4. What advantages help explain why virtually all large companies are organized as C corporations? 5. What steps are involved in forming a C corporation? 6. Describe the relationship between a corporation’s common stockholders, its board of directors, and its chief executive officer (CEO). 7. How does a merger differ from an acquisition? What is the difference between a horizontal merger or acquisition and a vertical merger or acquisition? Give a real world example of recent merger to illustrate each type of combination. 8. Compare an S corporation with a limited liability company. Why do you think limited liability companies are currently more popular than S corporations? 9. What are the main advantages and disadvantages of a business format franchise arrangements for the franchisee? For the franchisor? 10. What is a Franchise Disclosure Document (FDD) and...
Words: 1935 - Pages: 8
...mode of entry affects the decisions which a company has to make, when facing challenges like those of marketing and production strategies. The mode of entry also decides the control a company has on the operations in the new market, and the way investment and the revenue is divided between the parent and the collaborated company. There are different modes through which a company can enter China; the main ones have been briefed below: Representative Office: The simplest way for a company to establish in China is through opening a representative office in China. The representative office acts as a bridge between the foreign company and its business partners in China. It gives the company a platform to conduct market research, make business contacts, manage product promotion and manage other activities for the parent company like making travelling arrangements for its company representatives. Compensation Trade: Manufacturing companies who want to outsource their production usually have a compensation trade agreement with firms in China. Usually a barter system is followed in which the parent company gives machinery to the Chinese and the Chinese produce the product for the company. This type of agreement needs compliance with the Foreign Trade Authority. Due to the rising interest of the Chinese government in attracting the foreign companies towards China, there is an array of ways a foreign company can collaborate with a Chinese company to form a joint-venture. Most widely used...
Words: 641 - Pages: 3
...are responsible for all debts. This also puts personal assets in line of creditors. A sole proprietor could get wiped out with one large personal lawsuit and lose everything. Income taxes: Taxes for the business are processed as the owner's personal business, which is usually higher compared to other business tax rates. Longevity: This is based on initial work done by the owner when the business is started. It can depend on how the owner finances the business. Typical funding for this type of business is just a personal loan. Control: Owner is 100% in control of everything with the business and does not have to consult with anyone else prior to making important decisions Profit retention: Since the owner retains 100% of the profits, the returns on investments can be whatever the owner wishes at any given time. The owner can retain an entires months profits for investment purposes, or pocket the entire months profits if he/she so choses. Expansion: One of the downfalls of this type of business is that the owner is not legally allowed to bring in a partner or co-owner, so expansion is quite limited. An owner may sell assests associated with the business (aka personal assests), but if the owner dies, the entire business will not continue. Compliance: Extra...
Words: 1049 - Pages: 5
...Small Business Idea Katrina Le`Vere University of Phoenix ACC 561 July 17, 2012 Samuel G. Smith Introduction Starting a business requires a decision governing what form of business organization the company or corporation should operate under. This decision must be made before the business has actually begun operations. The owner must make two initial decisions in order to begin their business operation: the type of business entity to be used and where the business assets will come from. The decision depends on several factors, including the capital requirements of the business, the flexibility of management decisions, costs of formation, government restrictions, and tax considerations. Sole proprietorship, partnerships, corporations, and S-corporations are four legal forms of business organization an entrepreneur may consider when forming a business. (Sitarz, 21) Advantages and Disadvantages of the four business forms of organization The most common and simplest form of business organization is sole proprietorship. It is the least regulated of all types of business structures. Sole proprietorship is the traditional unincorporated one-person business. The advantages of sole proprietorship are: less expensive to start up, owners have full control over management decisions, owners receive the profits, and they can transfer or sell the business at their discretion. Some disadvantages to choosing sole proprietorship...
Words: 2154 - Pages: 9
...Course: BTECH – HND – Business (Management) Year: 2015/2016 Name: Susantha Suwandaratne Subject: Unit 01: Unit 01: Business Environment Complete Date: 4th Of January 2016 Words between 2500 and 4000 _______________________________________________________________ Task 1 - Understand the organisational purpose of business ___________________________________________________________________________ 1.1 Identify the purpose of four different types of organisation. 1.2.1 Introduction Business organisation is formed of relationship, responsibility and authority, which aims to meet their targets and ultimately achieve them. Organisations are formed by people for two main purposes. An organisation can be formed by a person or a group of people aiming to make a profit. In the same way a person or a group of people can start an organisation with the purpose of providing services to themselves or for the society with the main purpose of running the business is not a profit. According to Buchanan and Huczynski an organisation is described as 'A work organisation is a social arrangement for the controlled performance of collective goals' (Buchanan and Huczynski, (2004). The Business Dictionary defines the organisation as ‘a social unit of people that is structured and managed to meet a need or to pursue collective goals’. All organisations have some function to perform and they exist in order to achieve...
Words: 2155 - Pages: 9
...Different Types of Ownership in the Business Sector. Different Types of Ownership in the Business Sector. Sole tradership is when the business is fully owned and managed by one person, though others can be employed to help run the business. As the sole traders only financial income is from the business and/or bank loan, they do not have the resources to expand and cover regional or national areas. These types of businesses are located in the small business sector and usually cover local areas. Such businesses could be hairdressers, corner shops or market stalls etc. Sole traderships have unlimited liability so if the business fails to pay its debts the financial responsibility falls on the owner/s to pay the debts in full even if they have to sell their business, personal possessions and assets. Another example of business ownership is a partnership. Examples of partnerships used in business are accounting firms and solicitors firms. A partnership has two or more owners. They work, manage and are responsible for the running of the business. Individual partners may concentrate on a certain aspect of the business where they have expert knowledge. As there is more than one owner, larger amounts of capital can be fed into the business via personal funding or bank loans. Partnerships have an unlimited liability. There are two types of limited companies: Private and public. Shareholders own private limited companies. Members of the public cannot buy the shares and the shareholders...
Words: 414 - Pages: 2
