3 Legal Forms of Business
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3 Legal Forms of Business

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3 Legal Forms of Business 3 Legal Forms of Business Presentation Transcript

  • 5
    Section 2: Forms of Business Ownership
  • Chapter 7
    Slide 2
    Lesson 7.2Choose a Legal Form of Business
    Objective:
    Students will be able to:
    Discuss advantages and disadvantages of a sole proprietorship, partnership, and corporation.
  • Chapter 7
    Slide 3
    Terms
    sole proprietorship
    partnership
    corporation
    share of stock
    board of directors
    dividends
  • Chapter 7
    Slide 4
    Sole Proprietorship
    sole proprietorship
    a business that is owned exclusively by one person
  • Chapter 7
    Slide 5
    Advantages of a Sole Proprietorship
    Easy to get established
    Full control over all business decisions
    Owners keep all profit
    Flexibility
    Tax advantages
  • Chapter 7
    Slide 6
    Disadvantages of a Sole Proprietorship
    It can be difficult to raise money for the business.
    Responsible for every aspect of the business
    Unlimited liability
    Personally liable for business debts
    Limited skills and knowledge
  • Chapter 7
    Slide 7
    Partnership
    partnership
    a business owned by two or more people
  • Chapter 7
    Slide 8
    • Disadvantages of a partnership include:
    Responsibilities, profits, and losses are shared
    can be held liable for errors of partners
    unlimited liability for business expenses
    responsible for all debts
    business income is taxed as personal income
  • Chapter 7
    Slide 9
    • Advantages of a partnership include:
    easy to establish
    multiple sources of capital
    risks are spread among partners
    minimal government regulation
    profits are taxed once
  • Chapter 7
    Slide 10
    Corporation
    corporation
    a business that has the legal rights of a person but is independent of its owners
  • Corporation
    You must file articles of incorporation with the appropriate state government office.
    Articles of incorporation is a written document that defines:
    Ownership
    Operating procedures
    Conditions for the business.
    Chapter 7
    Slide 11
  • Corporation
    Must create corporate bylaws that are the operating procedures for the corporation.
    It must name a board of directors
    Issue share of stocks to investors
    Chapter 7
    Slide 12
  • Corporation
    board of directors
    a group of people who meet several times a year to make important decisions affecting the company
    in addition to strategic decisions, they also determine dividend payments
    Chapter 7
    Slide 13
  • Corporation
    share of stock
    a unit of ownership in a corporation
    The individual or group that owns most shares maintains control of the company.
    dividends
    distributions of corporate profits to shareholders
    Chapter 7
    Slide 14
  • Chapter 7
    Slide 15
    Advantages of Incorporation
    Personal liability is limited to the amount of money each shareholder invested in the company.
    Personal assets of shareholders are protected.
    Corporations can raise money by selling stock.
  • Chapter 7
    Slide 16
    Disadvantages of a Corporation
    The disadvantages of a corporation include:
    A lawyer is required to establish a corporation because a corporation is complex.
    costly
  • Chapter 7
    Slide 17
    Corporations are subject to more government regulation that other types of businesses.
    Income is taxed twice.
    corporate income
    individual income
    Disadvantages of a Corporation
  • Choosing a Legal Form of Business
    Is it easy to establish?
    Start-up Cost
    Liability
    Taxation
    Distribution of profits
    Management Control
    Chapter 7
    Slide 18