Subject : Introduction to Business Semester : BBA-1st By - Hijratullah Tahir

1. Forms of Business
Ownership
Chapter No. 2
Arranged By: Hijratullah Tahir

2. Getting Start
o People who decide to start a business and are willing
to take risks
o Entrepreneurs should collect information about the
business;
• the factors of production for the products, and
• learn about taxes and laws relating to the
business.
oSmall Business Incubator: private or government
funded agency that assists new businesses by
providing advice or low-rent buildings and supplies
Entrepreneurs:

3. Sole Proprietorship
• A business owned and managed by one individual;
the business and the owner are one and the same
in the eyes of the law
• The biggest advantage is that the owner receives all
the profits and has full control of the business.

4. Sole Proprietorship
Simple to create
Least costly form
Profit incentive
Total decision-making
No special legal
restrictions
Easy to discontinue
Advantages

5. Sole Proprietorship
Unlimited personal liability
Limited skills and abilities
Feelings of isolation
Limited access to capital
Lack of continuity of
business
Disadvantages

6. Partnership
• An association of two or more people who co-
own a business for the purpose of making a
profit
• Partners sign a legally binding agreement
describing the duties of each partner, division
of profits and distribution of assets at end of
partnership.
• A partnership agreement / Deed

7. Partnership
Easy to establish
More Skills Expertise
Division of profits
Larger pool of capital
Ability to attract limited partners
Little governmental regulation
Flexibility
Taxation
Advantages

8. Partnership
Disadvantages
Unlimited liability of at least one
Difficulty in disposing of interest
Lack of continuity
Potential for personality and
authority conflicts
Partners bound by law of agency

9. Special Partnerships
• General Partner – Responsible for the
management of duties and Debts payment
• Limited partnership-composed of at least one
general partner and at least one limited partner
• Master limited partnership- a partnership
whose shares are traded on stock exchanges,
just like corporations

10. Partnership Continue
• Joint Venture: partnership set up for a specific purpose for a short
period of time.
• The joint venture is dissolved after it has accomplished its goal.
• Joint ventures are sometimes are sometimes sold later for profit.
• VFS with KU on Online business & Sony Ericson,
Joint Ventures

11. Corporations
• Corporation:
₋ Owned by many people but treated by law as a
person; it can own property, pay taxes, make
contracts, and so on
₋ The need for financial capital
₋ Wanting financial backers who will lend funds
without having a hand in the business.

12. Corporation Structure
• Selling stock
• Raise capital by selling stocks or bonds.
• Common stock gives stockholders right to vote and a percentage of
future profits.
• Preferred stock doesn’t give voting rights, but guarantees a
dividend and these stockholders have first claim on assets left over
if corporation goes out of business.
• Naming a Board of Directors
• Stockholders elect a board of directors who will supervise and
control the corporation by hiring people to run the day-to-day
operations of the business.

13. Corporations
• Stock:
₋ Share of ownership in a corporation that entitles the
buyer to a certain part of the future profits and
assets of the corporation
• Registering the Corporation
₋ Register the corporation in the state where it will be
headquartered.
₋ File the articles of incorporation which includes:
• Name, address, and purpose of corporation
• Names and addresses of the initial board of directors (the new
board will be elected at the first stockholder’s meeting)
• Number of shares of stock to be issued
• Amount of money capital to be raised through issuing stock.

14. Corporations
Certificate of Incorporation
Name
Statement of purpose
Time horizon
Names and addresses of incorporators
Place of business
Capital stock authorization’
Capital required at time of incorporation
Provisions for preemptive rights
Restrictions on transfering shares
Names and addresses of officers

15. Corporations
Advantages
Limited liability of
stockholders
Ability to attract
capital
Ability to continue
indefinitely
Transferable
ownership

16. Corporations
Disadvantages
Cost and time in
incorporating
Double taxation
Potential for diminished
incentives
Legal requirements and
red tape
Potential loss of control

17. Franchises
• Franchise:
• contract in which one business (the franchiser)
sells to another business (the franchisee) the right
to use the franchiser's name and sell its products
• The franchisee pays a fee
• Franchises often have training programs
• Like; LG franchise
with Momin Group