3 Legal Forms of Business

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3 Legal Forms of Business

  1. 1. 5<br />Section 2: Forms of Business Ownership <br />
  2. 2. Chapter 7<br />Slide 2<br />Lesson 7.2Choose a Legal Form of Business <br />Objective:<br />Students will be able to:<br />Discuss advantages and disadvantages of a sole proprietorship, partnership, and corporation.<br />
  3. 3. Chapter 7<br />Slide 3<br />Terms<br /> sole proprietorship<br /> partnership<br /> corporation<br /> share of stock<br /> board of directors<br /> dividends <br />
  4. 4. Chapter 7<br />Slide 4<br />Sole Proprietorship<br />sole proprietorship<br />a business that is owned exclusively by one person <br />
  5. 5. Chapter 7<br />Slide 5<br />Advantages of a Sole Proprietorship<br />Easy to get established<br />Full control over all business decisions<br />Owners keep all profit<br />Flexibility<br />Tax advantages <br />
  6. 6. Chapter 7<br />Slide 6<br />Disadvantages of a Sole Proprietorship<br />It can be difficult to raise money for the business.<br />Responsible for every aspect of the business<br />Unlimited liability<br />Personally liable for business debts<br />Limited skills and knowledge<br />
  7. 7. Chapter 7<br />Slide 7<br />Partnership <br />partnership<br />a business owned by two or more people<br />
  8. 8. Chapter 7<br />Slide 8<br /><ul><li>Disadvantages of a partnership include:</li></ul>Responsibilities, profits, and losses are shared<br />can be held liable for errors of partners<br />unlimited liability for business expenses <br />responsible for all debts <br />business income is taxed as personal income<br />
  9. 9. Chapter 7<br />Slide 9<br /><ul><li>Advantages of a partnership include:</li></ul>easy to establish<br />multiple sources of capital<br />risks are spread among partners<br />minimal government regulation<br />profits are taxed once<br />
  10. 10. Chapter 7<br />Slide 10<br />Corporation <br />corporation<br />a business that has the legal rights of a person but is independent of its owners<br />
  11. 11. Corporation<br />You must file articles of incorporation with the appropriate state government office.<br />Articles of incorporation is a written document that defines:<br />Ownership<br />Operating procedures <br />Conditions for the business.<br />Chapter 7<br />Slide 11<br />
  12. 12. Corporation<br />Must create corporate bylaws that are the operating procedures for the corporation.<br />It must name a board of directors<br />Issue share of stocks to investors<br />Chapter 7<br />Slide 12<br />
  13. 13. Corporation<br />board of directors<br />a group of people who meet several times a year to make important decisions affecting the company<br />in addition to strategic decisions, they also determine dividend payments<br />Chapter 7<br />Slide 13<br />
  14. 14. Corporation<br />share of stock<br />a unit of ownership in a corporation<br />The individual or group that owns most shares maintains control of the company.<br />dividends<br />distributions of corporate profits to shareholders<br />Chapter 7<br />Slide 14<br />
  15. 15. Chapter 7<br />Slide 15<br />Advantages of Incorporation<br />Personal liability is limited to the amount of money each shareholder invested in the company.<br />Personal assets of shareholders are protected.<br />Corporations can raise money by selling stock.<br />
  16. 16. Chapter 7<br />Slide 16<br />Disadvantages of a Corporation<br />The disadvantages of a corporation include:<br />A lawyer is required to establish a corporation because a corporation is complex.<br />costly<br />
  17. 17. Chapter 7<br />Slide 17<br />Corporations are subject to more government regulation that other types of businesses.<br />Income is taxed twice.<br />corporate income<br />individual income <br />Disadvantages of a Corporation<br />
  18. 18. Choosing a Legal Form of Business<br />Is it easy to establish?<br />Start-up Cost<br />Liability<br />Taxation<br />Distribution of profits<br />Management Control<br />Chapter 7<br />Slide 18<br />

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