Introduction To Business

2. Some of the questions that you’d probably ask yourself in
choosing the appropriate legal form for your business :
1. What are you willing to do to set up and operate your business?
2. How much control do you want?
3. Do you want to share profits with others?
4. Do you want to avoid special taxes on your business?
5. Do you have all the skills needed to run the business?
6. Should it be possible for the business to continue without you?
7. What are your financing needs?
8. How much liability exposure are you willing to accept?
Abdulahi Abukar “ ABAJEY”

3. If you’re starting a new business, you have to decide
which legal form of ownership is best for you and
your business. Do you want to own the business
yourself and operate as a sole proprietorship? Or, do
you want to share ownership, operating as a
partnership or a corporation? Before we discuss the
pros and cons of these three types of ownership—
sole proprietorship, partnership, and corporation—
We all ready address you some of the questions that
you’d probably ask yourself in choosing the suitable
legal form for your business.
Abdulahi Abukar “ ABAJEY”

4. There really is not one right form of
ownership.
The correct form depends of the type of
company, the goals of the owners, and
the plans of what the
company may become. Factors such as
tax considerations, liability experience,
capital requirements and structure and
ownership
control all play a role is determining
which form is correct for a business.
Abdulahi Abukar “ ABAJEY”

5. Abdulahi Abukar “ ABAJEY”

6. A sole proprietorship is a business owned by
only one person who has unlimited liability.
The most common form of ownership, it
accounts for about 75 percent of all U.S.
businesses. U.S It’s the easiest and cheapest
type of business to form: you can use your
own name as the name of your business, you
just need a license to get started, and once
you’re in business, you’re subject to few
government regulations.
Abdulahi Abukar “ ABAJEY”

7.  •Unlimited Liability- a legal
responsibility stating that the owner
must settle all debts of the business. If
the debt of a business is larger than his
personal assets than they may be
forced into bankruptcy
 • Economies of Scale- are the factors
that cause average costs to be lower in
large scale operations than in small
level ones.
Abdulahi Abukar “ ABAJEY”

8. Sole trader is a person who owns and
operates their own business.
They may or may not employ other people.
It is important to remember that a sole
trader is usually a relatively small business
with little capital available for expansion
and the capital that has been invested
comes from one source and that
is the owner.
Sole traders are common businesses.
Example of a sole trader business is a
hairdresser. Abdulahi Abukar “ ABAJEY”

9. The advantages of being a sole trader are:
• Profits - they are kept by the owner.
There are no other shareholders so the profits
don't have to be split.
• Easy to run- every business is difficult to run
successfully but sole trader is the easiest form of
business
• Easy to set up- hardly any complicated forms
or measures. Some of the other legal forms have
to have legal forms completed before the
business can start.
Abdulahi Abukar “ ABAJEY”

10. • Total control - the owner is in charge of the
business. He/she does not need to discuss their
decisions with any other owners. They have total
control of the business.
• Privacy- As there are no shareholders in the
business you only need to inform Inland Revenue
and Customs and Excise in order for them to see
how well the sole proprietor is doing
• Flexibility- very flexible working hours as sole
trader is its own boss. Rather than working on
Friday he/she decides to work on Sunday instead.
Abdulahi Abukar “ ABAJEY”

11. Disadvantages of Sole Trader:
• Illness- If ill the business might be forced to shut
down stopping the income and profits
• Unlimited liability- if the things don’t work out as
planned the sole proprietor could lose all its
investment.
• Lack of continuity- because the owner is the business
there is no guarantee that the business will carry on
running once the owner decided to stop.
Abdulahi Abukar “ ABAJEY”

12. Long hours- long hours may be required of the owner to
keep the business afloat.
• Difficulty in raising capital- small businesses find it hard
to find a start up capital and usually the owner might have
to put his/her house as an insurance for capital borrowed
• Limited specialisation- as the owner has to be a
purchaser, lorry driver and accountant there is no time for
this person to specialise in all fields
• Limited economies of scale- e.g. a small construction
business would have to hire a lorry to do the required task as
this would be cheaper but larger business would buy its own
as this would prove to be cheaper owing to the fact that
lorry is in continuous use.
Abdulahi Abukar “ ABAJEY”

13.  What is partnership?
Partnership is a type of business where
2 or more people agree to own, run
and trade. Partnerships require a
high degree of trust and are very
common in fields such as medicine.
Abdulahi Abukar “ ABAJEY”

14. When setting up a business a person has to decide
whether to set up a business on their own or with
others.
This will depend on:
• How much control they want over the business
• Are they prepared to share the profit
• Can they raise necessary capital to start up the
business by themselves
• There is also a risk factor. Is this person prepared to
accept the risk of unlimited ability?
Abdulahi Abukar “ ABAJEY”

15. The advantages of partnership are:
Easy to set up
Solicitors and accountants are not required to run the
business profits belong to the partners
Privacy. Only tax authorities need to be told how much
partners are earning and profit of the business
Raising capital for the business is easier than that of sole
proprietor
Different expertise for partners e.g. specialises in
accountancy whilst the other in marketing
Abdulahi Abukar “ ABAJEY”

16. The disadvantages of partnership:
Disagreements between partners, which can
be bad for business
Some partnerships don’t have a action of
partnership, which can be bad for business
Most partnerships are relatively small
businesses e.g. Shops, farms
Some entrepreneurs are not willing to share
responsibilities and profits or some
entrepreneurs fear being held legally liable.
Abdulahi Abukar “ ABAJEY”

17. A corporation (sometimes called a
regular or C-corporation) “Is Firm
that meets certain legal requirements to be
recognized as having a legal existence, as
an unit separate and distinct from its
owners”. Corporation is differs from
a sole proprietorship and a
partnership It can enter into
binding contracts, buy and sell
property, sue and be sued, be held
responsible for its actions, and be
taxed. Abdulahi Abukar “ ABAJEY”

18. C-corporation: The C Corporation is
the most common form of corporate
body. Also known as a “General for
profit corporation”, the C Corporation
is owned by shareholders.
The shareholders elect a board of
directors to create and direct the high-
level policies of the business.
C-corporation the most common type of
corporation. It protects the
entrepreneur from being personally
sued for the actions and debts of the
corporation. Abdulahi Abukar “ ABAJEY”

19. Subchapter S-corporation:
S Corporation is formed in the same
way that a C Corporation is formed -
the Incorporator files Article of
incorporation with the state office.
However, the S Corporation is
different from a C Corporation.
A corporation that is taxed like a sole
proprietorship or partnership with
each shareholder paying tax on the
amount of their proportionate shares
Abdulahi Abukar “ ABAJEY”

20. Nonprofit Corporation: A Nonprofit
corporation is a special type of corporation that
has been organized to meet specific tax-exempt
purposes. To qualify for Nonprofit status, your
corporation must be formed to benefit:
(1) the public,
(2) a specific group of individuals,
(3) the membership of the Nonprofit.
Examples of Nonprofits include: religious
organizations, charitable organizations, political
organizations, credit unions and membership
clubs such as the Elk's Club or a country club.
Abdulahi Abukar “ ABAJEY”

21. Owners' personal assets are protected from
business debt and liability
Corporations have unlimited life extending
further than the illness or death of the owners
Tax free benefits such as insurance, travel, and
retirement plan deductions.
Transfer of ownership facilitated by sale of stock
Change of ownership need not affect management
Easier to raise capital through sale of stocks and
bonds
Abdulahi Abukar “ ABAJEY”

22. Double taxation. Depending on the type of corporation, so
income can be taxed twice.
extreme tax filings. Depending on the kind of corporation,
the various types of income and other taxes that must be
paid can require a substantial amount.
Independent management. If there are many investors
having no clear majority interest, the management team of a
corporation can operate the business without any real
mistake from the owners.
More expensive to form than proprietorship or partnerships
More legal formality
More state and federal rules and regulations
Abdulahi Abukar “ ABAJEY”

23. MNC
Abdulahi Abukar “ ABAJEY”

24. A multinational corporation has
facilities and other assets in at least one
country other than its home country. Such
companies have offices and/or factories in
different countries and usually have a
centralized head office where they
coordinate global management. Very large
multinationals have budgets that exceed
those of many small countries.
Abdulahi Abukar “ ABAJEY”

25.  10. Autodesk Inc.
Autodesk is an American
MNC which produces
software for architecture,
drawings, engineering,
construction etc. Founded
in 1982, by John Walker, is
headquartered at San
Rafael, California, The
company has employs
over 9000 people.
Abdulahi Abukar “ ABAJEY”

26. 9. Diageo:
Diageo is a multinational company based in
London, UK. It is an alcoholic beverage
manufacturer. It is the largest producer of
beer in the world. It has offices in around 85
countries and has market in 180 countries. It
was founded in 1997.
8. W.L Gore and associates:
This is an US based multinational company
famous for the products it manufactures
from
fluoro-polymers.
It has its headquarters in Newark, Delaware. It
was founded in 1958 by Bill Gore. The
company employs 12000 people. Abdulahi Abukar “ ABAJEY”

27. 7. FedEx:
FedEx is a MNC courier service based from
Tennessee, USA. FedEx is the acronym of
Federal Express. The company was
founded in 1971 by Frederick Smith. It is
one of the largest employer in the world
with over 300,000 employees.
6. Marriott:
This again is a US based Multinational
company based from Maryland. The
company is specialized in hospitality
services and has many 5-star hotels spread
across different parts of the world. It was
found in 1927 by the Marriott family. it
employs around 200,000 people.
Abdulahi Abukar “ ABAJEY”

28.  5. Microsoft:
This is one of the most famous global
software company, based that hails
from Redmond, Washington. It was
founded by Bill Gates and Paul Allen in
1975. employs 115,000 all over the
world.
 4. Kimberly-Clark Inc:
This again is a US based company
specialized in producing personal care
products mostly paper-based
products. It was founded in 1872 The
company has about 45,000 employees
Abdulahi Abukar “ ABAJEY”

29.  3. NetApp Inc:
This is a US- based data management
Multinational Company that is
headquarter in California, United
States. It was founded in 1992 by
David Hitz,
The company employs around 11,000
people worldwide.
 2. Google Inc:
The company is known for its internet-
related services and online search,
cloud and software. The company was
founded by Larry Page and Sergey Brin
in 1998 in Mountain View, California. It
employs 57,000 people worldwide.
Abdulahi Abukar “ ABAJEY”

30.  1. SAS Inc:
SAS is the acronym for
Statistical Analysis System.
The company was founded in
1976 by Anthony James Barr.
The headquarters is located
in Cary, North Carolina. It is
also the world’s largest
Private software publisher.
It has an annual turnover of
around $3 billion and
employs around 15000
people.
Abdulahi Abukar “ ABAJEY”

31. Abdulahi Abukar “ ABAJEY”

32. 1. Define :
a. sole proprietorship
b. Partnership
c. Corporation
d. MNC
2. What are the Advantage and Disadvantage of
all (Sole, Partnership and corporate)
3. What are Unlimited Liability and Economies of
Scale?
Abdulahi Abukar “ ABAJEY”

33. Abdulahi Abukar “ ABAJEY”