Mae Salve Sofia O.

Yu
BSA 2A
Financial Management 101

Module 4 Forms of Business Organizations

1. Among the three basic forms of ownership, describe the ability of each form
to access capital.
Sole proprietorship has the ability to control and access the capital on your own
with out the permission of anyone because the owner owns all the assets of the
business and the profit generated by it. The owner has the full responsibility of the
capital.
Partnership’s access capital depends on the contribution of a partner or it depends
on their agreement on how and who will have the most access in their partnership
capital. Both of them will have to contribute money or asset to build a capital for
their business.
Corporation capital investment is having enough cash, loans or assets to fund a
company's operations. Banks, investors, financial institutions, angel investors and
venture capitalists are all sources of capital investment. Just like in partnership the
access capital the members of the corporation contributes.

2. Explain how the founder of a business can eventually lose control of the
firm. How can the founder ensure this will not happen?
The founder of a business can eventually lose control of the firm if he/she
is incompetent leader. When the founder wants the business to grow quickly, more
capital is required. In the early stages of a small fast growing company, it is equity
capital that is available. In other words, the founder must give up a portion of
his/her ownership to other investors. As this process continues over time, the
founder may find that he/she no longer owns a majority of the firm. There may
come a time when enough of these other owners that own a combined 50+% of the
firm come together and change the leadership of the firm
 3. Who owns a corporation? Describe the process whereby the owners control
the firm’s management. What is the main reason that an agency relationship
exists in the corporate form of organization? In this context, what kinds of
problems can arise?
In the corporate form of ownership, the shareholders are the owners of
the firm. The shareholderselect the directors of the corporation, who in turn
appoint the firm's management. This separationof ownership from control in the
corporate form of organization is what causes agency problemsto exist. Agency
relationship exists in the corporate form of organization because of the separation
between the ownership and control. This separation of ownership from control in
the corporate form of organization is what causes agency problems to exist.
Management may act in its own or someone else's best interests, rather than those
of the shareholders correct.