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Chapter 6 forms of busineess ownership.docx

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Department
Commerce
Course
COMM 100
Professor
David Crawford
Semester
Winter

Description
Chapter 2 Forms of business ownership Three major forms of business ownership: -Sole proprietorship: A business that is owned and operated by one person, without forming a corporation. -Partnership: A legal form of business with two or more parties. -Corporation: A legal entity with authority to act and have liability separate from its owners. Liability: another word for debt. For a business, it includes the responsibility to pay all normal debts and to pay because of a court order or law, for performance under a contract, or payment of damages to a person or property in an accident. Advantages of Sole proprietorship: 1. Ease of starting and ending the business. 2. Being your own boss. 3. Pride of ownership 4. Retention of company profit. 5. No special taxes. 6. Less regulation. Disadvantages of Sole proprietorship: 1. Unlimited liability—the risk of personal losses. 2. Limited financial resources. 3. Management difficulties. 4. Overwhelming time commitment. 5. Few fringe benefits. 6. Limited growth. 7. Limited lifespan. 8. Possibly pay higher taxes. Partnerships: General partnership: A partnership in which all owners share in operating the business and in assuming liability for the business’s debts. Limited partnership: A partnership with one or more general partners and one or more limited partners. General partner: An owner who has unlimited liability and is active in managing the firm. Limited partner: An owner who invests money in the business but does not have any management responsibility or liability for losses beyond the investment. Limited liability: The responsibility of a business’s owners for losses only up to the amount they invest; limited partners and shareholders have limited liability. Advantages of Partnerships: 1. More financial resources 2. Shared management and pooled skills and knowledge 3. Longer survival 4. No special taxes 5. Less regulation Disadvantages of Partnerships: Any time two people must agree, there is the possibility of conflict and tension. Partnerships have caused splits among families, friends, and marriages. 1. Unlimited liability: general partner is liable for the debts. 2. Division of profits. 3. Disagreements among partners. 4. Difficult to terminate. Partn
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