Forms of Ownership

1. Forms of Ownership

2. Factors • Vision Regarding Future Growth • Nature of Business • Level of Control • Lawsuit Vulnerability • Tax Implications • Expected Profits (or Loss) • Earnings Reinvestment • Personal Cash Needs

3. Form vs. Profits • Proprietorship • 72% of businesses • 5% of profits • Corporations • 20% of businesses • 85% of profits • Beyond these numbers

4. Advantages Secrecy Taxes Keep all profits Freedom of action Easy set-up Disadvantages Limited capital Hard to obtain credit Inadequate management skills Unlimited liability Limited business life Proprietorships

5. Partnerships • Legal Contracts • Decision Making • Uniform Partnership Act • Types • General partnership • Limited partnership • Rights of Partners • Articles of Copartnership

6. Advantages Easy to form Division of labor More people= More ideas Specialized skills Can raise more capital due to more credit Extra financial resources Disadvantages Limited life Unlimited liability Responsibility for other partners Conflict Death and partnership Lack of bonding protection Partnerships

7. Corporation • Definition • Legal entity- like a person • C-Corporation • Forming a Corporation • Articles of incorporation • Corporate charter • Buy-sell agreement

8. Advantages Representative management Easy to raise capital Separate legal entity Relatively permanent Limited liability Disadvantages Impersonal Owners have limited interest Incorporation fees Double taxation More paperwork Powers limited to those stated in charter Corporation

9. Corporation • How Governed • Stockholders • Board of directors • Corporate officers • S Corporation • Advantages • Disadvantages • Decreasing Popularity

10. Other Forms • Limited Liability Company • Advantages • Limited Liability Partnership • Family Limited Liability Partnership • Professional Service Corporation • Nonprofit Corporations • Cooperative • Joint Venture