 Discuss the issues that entrepreneurs

should consider when evaluating different

forms of ownership.
 Describe the advantages and disadvantages
Learning of the sole proprietorship.
Objectives  Describe the advantages and disadvantages
of the partnership.
 Describe the advantages and disadvantages
of the corporation.
 Each form of ownership has its
Forms of own unique set of advantages
Ownership and disadvantages.
mber of Days to Start a Business in the United States
  Because of the graduated tax rates
under each form of ownership, the
government’s constant tinkering with
Tax the tax code, and the year-to-year
considerations fluctuations in a company’s income, an
entrepreneur should calculate the firm’s
tax bill under each ownership option
every year.
  Certain forms of ownership offer

Liability business owners greater protection from

personal liability due to financial
exposure problems, faulty products, and a host of
other difficulties.
Start-up and  Forms of ownership differ in their ability
future capital to raise start up capital.
requirements
  Entrepreneur must decide early on how
much control they are willing to sacrifice
Control in exchange for help from other people
in building a successful business.
  If an entrepreneur lacks skills or experience
Managerial in certain areas, he/she may need to select

ability a form of ownership that allows him/her to

bring skills and experience.
  How big and how profitable an entrepreneur
Business plans for the business to become will
goals influence the form of ownership chosen.
  Some forms of ownership make this
Management transition much smoother than other. In
Succession other cases, when the owner dies, so
Plans does the business.
  Some forms of ownership are much more
costly and involved to create than others.
Cost of Entrepreneurs must weigh carefully the
Formation benefits and the costs of the particular
form they choose.
Forms of
Business
Ownership
  the simplest and most popular
form of ownership
Sole  The sole proprietor is the only
proprietorship owner and ultimate decision maker
for the business.
Failure of the business can ruin a sole proprietor
financially
  a document that states all of the
terms of operating the partnership
partnership for the protection of each partner
involved:
agreement
 Addresses in advance potential conflicts
 1. Name of the partnership
2. Purpose of the business
3. Location of the business
4. Duration of the partnership
5. Names of the partners and their legal
Components addresses
of 6. Contributions of each partner to the
agreement business, at the creation of the business
and later
7. Agreement on how the profits or losses
will be distributed
8. Agreement on salaries or drawing rights
against profits for each partner
 9. Procedure for expansion through the
addition of new partners
10. Distribution of the partnership’s assets if the
partners voluntarily dissolve the partnership
11. Sale of the partnership interest
Components 12. Absence or disability of one of the partners
of 13. Voting rights
agreement 14. Decision-making authority
15. Financial authority
16. Handing tax matters
17. Alterations or modifications of the
partnership agreement