Ownership and Structural Forms of Business Enterprise Chapter 5
Ownership It means the legal title to a thing or control over the thing owned, the right possession and disposal. Title to and possession of the assets of the enterprise , the power to determine the policies of the operation and the right to receive and dispose of the proceeds.
Types of business ownership Private Ownership When an enterprise is so organized that private individuals exercise and enjoy the rights and privileges of an owner in their own interest.
Types of business ownership Public Ownership Controlled by political bodies as a municipal , provincial or national government or by any instrumentality created by them
Types of business ownership Mixed Ownership It exists when the elements of ownership are divided such that private persons and public bodies share in the operation of the same enterprise
Forms of private ownership Individual or single or sole proprietorship Partnership Cooperative Organization Corporation Corporate combination
Factors involved in business forms The nature and size of the business The capital required and the means of procuring it The length of time the enterprise is expected to operate The technical conditions affecting the enterprise The types of products to be manufactured The method and volume of production The kind of markets to be supplied and methods of marketing The competitive nature of the chosen industry.
1. Single Proprietorship The ownership is vested in one person. This form of ownership is small, requires but little amount of capital and is readily established under the control of one man.
Advantages of single proprietorship It is easy to start and to terminate Control and management lies entirely in the hands of the owner Only a small amount of capital is required in starting Profits belong entirely to the owner High Credit Standing
Disadvantages of single proprietorship Limited judgment and wisdom. Limited amount of capital Unlimited liability Difficulties of Management
2. Partnership The business partnership is a business relationship between two or more persons competent to make contracts for the purpose of engaging in a business activity.
Advantages of partnership It could be as easily formed as the single proprietorship. There are more persons to conduct the business and to handle its problems. A partnership has access to greater or better credit facilities The combined ability and resources of partners are a source of strength. Retention of Valuable Employees
Disadvantages of partnership Unlimited liability of partners Disagreement between partners often lead to delay and difficulties which could endanger the enterprise. Easy dissolution Frozen Investment
Limited partnership One or more of the partners in a limited partnership must be general partners, who have unlimited liability. The limited or special partners have only limited liability, which is up to the extent of their investment.
Advantages of limited partnership There is a single direction of management , thus there is unity and prompt action The limited liability of special or limited partners , serves as good inducement of investments.
Disadvantages of limited partnership The unlimited power given to general partners may result in abuse. Possibility of collusion among partners to defraud the creditors.