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Chapter 10

CHAPTER 10.docx

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Department
Administrative Studies
Course
ADMS 3920
Professor
All Professors
Semester
Fall

Description
14September2012CHAPTER 10 FORM OF ORGANIZATION AND LEGAL ISSUESFORMS OF ORGANIZATION1The Soles Proprietorship Optionis a business owned by one person The business owner receives all the profits but is also subject to unlimited liability The death of an owner terminates the legal existence of a business Sole proprietorships are able to deduct normal business related expenses from income for tax purposes 2The Partnership Optiona legal entity based on the voluntary association of two or more persons to carry on as coowners a business for profit Partners share the profits and are also subject to unlimited liability Partnership should be formed only it if is the best option when all matters are considered The following questions should be asked before creating a partnershipWhat is our business concept Roles of the partners and how business will be doneHow are we going to structure ownership Share ownership between the partnersWhy do we need each other How do our lifestyles differ Family SinglePartnership Agreementa document that states explicitly the rights and duties of partners Agency Powerthe ability of any one partner to legally bind the other partners Death incapacity or withdrawal of any one partner ends a partnership and necessitates liquidation or reorganization of the business Limited Partnership a partnership with at least one general partner and one or more limited partners The General Partnera partner in a limited partnership who has unlimited personal liabilityLimited Partnera partner in a limited partnership who is not active in its management and has limited personal liability 3The Corporation Optionis a business organization that is owned by shareholders or stockholders who share in the profits and losses generated by the firm and are provided limited liability Corporations are legal entities Legal Entitya business organization that is recognized by the law as having a separate legal existence This means that a corporation can sue and be sued hold and sell property engage in business operations and pay taxes separately from its owners
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