forms of business ownership.

1. Forms of
Business
Ownership

2. Forms of Business Ownership
There are different types in which Business
Ownership exist.
Each form has its own advantages and
disadvantages.
Entrepreneurs need to understand the various
types of businesses ownership so that they can
choose the one that best suits their needs.

3. Forms of Business Ownership
There are Three main forms of business ownership,
which are;
Sole proprietorship,
Partnership, and
Corporation
Also Cooperatives, and Franchises are among the
other common forms

4. Sole proprietorships
Is a business owned and managed by One
Individual
Also known as Sole Trader
Sole trader can employ some people but
they will not be involved in the control of
business
the business and the owner are one and
the same in the eyes of the law

5. Sole proprietorships

6. Sole Proprietorship
Advantages
 Easy to start up
 Ease of management
 Owner keeps the profits
 Owner does not have to pay separate
business income tax
 Psychological satisfaction
 Easy to discontinue

7. Sole Proprietorship
Disadvantages
 Unlimited liability
 Limited access to raising financial capital
 Small size-may have limited inventory
 Limited managerial experience
 Difficulty of attracting qualified employees
 Limited life

8. Partnership
Is a business owned by two or more people who
share its risks and rewards
Usually 2 to 20 partners, not more than twenty,
persons
Partners legally share a business assets,
liabilities, and profits according to the terms of
a Partnership Agreement

9. Partnership Agreement
The partnership agreement is a legal document
that states all of the terms of operating the
partnership for the protection of each partner
involved
Such an agreement can specify the right and
obligation of each partner
Banks often want to review the partnership
agreement before lending the business money

10. Contents of Partnership
Agreement
 Percentages of ownership and distribution of
profits and losses
 Description of management powers and duties of
each partner
 Term (length) of the partnership
 How the partnership can be terminated
 How a partner can buy his/her share of the
partnership.

11. Characteristics of
Partnerships
Agreement: there should be agreement to form a
partnership. (persons who are not competent to
contract cannot be partners)
There must be a business: the agreement executed
by persons should relate to a business, and such
business should be lawful.

12. Characteristics of
Partnerships
Sharing the profits and losses: the profits or
losses of business must be clarified as per the
agreement
Participation in business: business should be
carried by all or any one of the partners.

13. Types of Partnerships
General Partnership
A partnership in which all partners have unlimited
personal liability and take full responsibility for the
management of the business
Limited Partnership
A partnership in which one or more of partners are
limited liability to only their investment

14. Types of Partnerships
Other types of partnership include;
Joint Venture
A partnership in which two or more companies joint
together to complete specific project, then the
partnership end after specified period of time
Strategic Alliance
A partnership in which two or more business work
together for mutual benefit.

15. Partnership
Advantages
 Ease of start up
 Ease of management
 Lack of special taxes on partnership’s income
 Larger pool of capital
 Ability to attract limited partners
 More efficient operations that come from
larger size

16. Partnership
Disadvantages
 Difficult of finding partner
 Divided Authority
 Possible conflict among partners
 Lack of trust and confidence
 Risk of joint responsibilities
 Unlimited liability

17. Corporation
Is a Company that is registered by a state and
operates apart from its owners.
In a corporation, the owners of the business are
protected from liability for the actions of the
company.
To form a corporation, the owners must get a
corporate charter from the state

18. Corporate Charter
The corporate charter/certificate should show;
 Name
 Place of business
 Statement of purpose
 Time horizon
 Names and addresses of incorporators
 Capital required at time of incorporation
 Restrictions on transferring shares
 By-laws

19. Corporate Structure

20. Corporations
Advantages
 Ease of raising financial capital
 Limited liability for its owners
 Board of directors can hire professional
managers to run the firm
 Unlimited life
 Ease of transferring ownership of the
corporation

21. Corporations
Disadvantages
 Double taxation of corporate profits
 Difficulty and expense of getting a charter
 Shareholders (owners) have little voice in how
the
business is run
 Subject to more government regulations than
others forms of business

22. Franchises
a contractual agreement to use the name and sell the
products or services of a company in a designated
geographic area
Franchising is a form of business organization in
which a firm that already has a successful product
or service (franchisor) licenses its trademark and
method of doing business to another business or
individual (franchisee) in exchange for a franchise
fee and an ongoing royalty payment

23. Components of Franchise
Business
Franchisor- actual owner of the business that lets
other investors rent or lease its name, business
profile, and way of doing business
Franchisee- investor who rents or leases the
business model from the franchisor and then hope
to recoup his/her investments by selling the
franchisor’s goods or service

24. Advantages of Franchise
 A proven product or service within an established
market.
 An established trademark or business system.
 Franchisor’s training, technical support, and
managerial expertise.
 An established marketing network.
 Availability of financing (varies).
 Potential for business growth

25. Disadvantages of Franchise
 Cost of the franchise.
 Restrictions on creativity.
 Duration and nature of commitment.
 Risk of fraud, misunderstandings, or of
franchisor commitment.
 Poor performance on the part of other
franchisees.
 Potential for failure

26. cooperative
Is an organization that is owned and operated by its
members
A cooperative is a separate legal entity from the
members, directors, and employees.
These parties are not liable for the entity’s debts
Each cooperative member has equal voting rights,
regardless of the number of shares they own or
their role in the organization

27. Advantages of Cooperatives
 Suitable for poor people
 Simple to form
 Limited liability
 Democratic management
 Tax Concession
 No Exploitation

28. Disadvantages of
Cooperatives
 Limited Capital
 Inefficient management
 Lack of secrecy
 Excessive stage regulations
 Internal conflicts

29. Which type of business ownership is appropriate
in your environment?

30. End