1. Forms of Business Organization Business Law Chapters 26 & 27

2. Three Principle Forms of Business  Sole Proprietorship  Partnership  Corporation Owned by ONE PERSON Owned by TWO OR MORE PERSONS A legal entity treated as an artificial person

3. Sole Proprietorship ProsCons SimplestPersonally responsible for all debts & liabilities Most flexibleOwner could loose personal & business assets Easiest to start

4. Partnership ProsCons All partners share profits equally All partners share losses equally Partners can agree to different distribution Each partner is fully responsible for all liabilities One partner can bind the other partners in contracts Also known as a General Partnership

5. Partnerships  Partnership Agreement – recommended to be in writing, but not required if under one year – attorney recommended, not required Review Partnership Agreement sample on page 479  General Partnership and Limited Partnership Most are General (considered general unless specified) Limited only possible with legal agreement – partner cannot be involved in the management of the business – can be informed but cannot even attend meetings or be consulted – risk is limited by investment

6. General Partners  Silent Partner – may be known to the public but takes no active part in the management  Secret Partner – not known by the public but does participate in the management  Dormant Partner – not known by the public and not participating – still liable  Nominal Partner – thought to be partners but really are not – are liable due to the misrepresentation

7. Phases of Termination of Partnership  Dissolution- when any partner ceases to be associated in the ordinary operation of the business  Winding Up Period – the time to deal with the details to end the partnership  Termination – when it is all done  Partnership At Will – can end at any time By one or more partners By law – death, bankruptcy Private or by Court Decree

8. Corporation ProsCons The corporation makes the money and pays the taxes The corporation looses and owes the money The corporation is liable – not the individual owners The corporation owns the assets – not the individual owners Owners cannot loose more than they actually invest Expensive to start up – need approval from the state More accounting and double taxation

9. In the Beginning  Must file an “Application” and “Articles of Incorporation” with the state  Once approved, the state will issue a Corporate Charter or Certificate of Incorporation

10. Types of Corporations Place  Domestic – chartered in a particular state  Foreign – does business in one state but is chartered in another state  Alien – chartered in another nation Purpose  Public – established for government purposes (state, hospitals, state universities)  Closely Held – private corporation owned by a small number of owners  Private – established by individuals – can be called “publicly held” because stock can be owned by the general public

11. Types of Corporations Further Classification of Private Corporations  Profit-making or “For Profit” – a private corporation organized to make money for its shareholders  Nonprofit – organized for social, charitable, or educational purposes – does not distribute profit to stockholders  Public Service or Public Utility – private corporation that furnishes an essential public service – high regulation

12. Corporate Ownership  Ownership is divided up into shares  Owners are called Shareholders (or Stockholders)  Owners have rights:  To transfer the ownership  Vote for those who will run the company  To receive dividends  To buy more shares  To share in the proceeds if the business sells out or goes out of business.

13. 3 Key Groups in a Corporation  Stockholders  Directors (Board of Directors)  Officers/Executives (CEO, CFO, …)  Responsible for providing general guidance  D evelop plans and policies to guide the corporation  Some states require at least three  Large companies typically have 10-25 board members  The top executives hired to manage the business  Usually appointed by the board & can be removed by the board  Head officer is called the CEO (Chief Executive Officer)

14. Board of Directors Do you have to be a stockholder to be a member of the board? Depends on the state statute and/or the corporate documents

15. Forms of Business  See chart on page 475  Read “A Question of Ethics” on page 475 Minors – states vary on whether a minor retains all the rights and privileges of a minor

16. Examples  Read “What’s Your Verdict” on page 477  Read “In This Case” on page 480  Read “What’s Your Verdict” on page 481  Read “Think Critically About Evidence” on page 483

17. Assignment 1.Vocabulary handout 2.Pick a large corporation and look up their website. Type up the following information on the corporation you selected: a) The company name b) The name of the CEO or President c) This person’s background, education, work experience, story (can often be found in the company’s website or with a google search) d) Does this person seem suited to run the company? Why or why not? What qualifies them? 3.What does it take to form a corporation in Utah? Do an internet search and find out. Type your findings.