Select Forms of Business Ownership Taking Care of Business Select Forms of Business Ownership Business Law LAP 2

Objectives Summarize the advantages and disadvantages of the most common types of business ownership. Demonstrate procedures for selecting a form of business ownership.

Objective Summarize the advantages and disadvantages of the most common types of business ownership.

Google, Starbucks, Coca-Cola, Nike, McDonald’s, Sony, Disney A few of the most famous companies in the world

They started out small. They changed ownership structure as they grew.

You might own your own business someday. You’ll need to know which ownership option best suits your needs and goals.

Weigh Your Options Ownership options include: Sole proprietorship Partnership (general and limited) Corporation Hybrid

Weigh Your Options Know the pros and cons of each option. Your choice affects taxation and government involvement.

Sole Proprietorship Advantages: Control Flexibility Ease of opening Owner retention of all profits

Sole Proprietorship Advantages: Privacy Ability to act quickly in making decisions Tax advantages Easy to close

Sole Proprietorship Disadvantages: Unlimited liability Limited capital Limited capabilities Uncertain life

Partnerships Advantages: Ease of start-up Combined resources Decreased competition Reduced expenses Tax advantages

Partnerships Disadvantages: Unlimited liability Limited capital Disagreements Difficulty in ending Uncertain life/transferability

Corporations Advantages: Limited liability Financial power Unlimited life Easy-to-transfer ownership Skilled personnel

Corporations Disadvantages: Difficulty in forming and operating More complex requirements Dual taxation Separate owners and managers

Hybrids LLC LLP Advantages: Limited liability Taxation Cost to start and operate Flexibility Combined resources Life span LLC LLP

Hybrids Disadvantages: LLC Relatively few No universal guidelines LLP

Demonstrate procedures for selecting a form of business ownership. Objective Demonstrate procedures for selecting a form of business ownership.

Steps for Selecting a Form of Ownership Determine the nature of the business. Assess your desired level of independence or control. Evaluate financial needs. Examine willingness to assume risk. Analyze your experience and abilities.

Steps for Selecting a Form of Ownership Implement steps to legalize the business. Take care of any copyrights, trademarks, or patents. Obtain any necessary permits or certifications.

Steps for Establishing a Sole Proprietorship Complete “Doing Business As” (DBA) form. Pay registration fee(s). Meet any health/safety requirements.

Steps for Establishing a Partnership Verify certification; obtain permits; pay registration fees. Make sure each partner understands his/her rights and responsibilities.

Steps for Establishing a Partnership Have a partnership agreement (optional in general partnerships). File a partnership agreement to operate a limited partnership. Consult an attorney to develop the agreement.

Steps for Establishing a Corporation Obtain the services of an attorney. File for a charter with the state in which the business is located. File “Articles of Incorporation,” if required. Pay incorporation fees.

Steps for Establishing a Hybrid Register with the state in which the business is located. Pay necessary initial and annual fees. File an operating agreement as the state requires.

Steps for Establishing a Hybrid Obtain filing procedures and details from your local government. Obtain legal advice, if needed.

Rhiannon’s sole proprietorship She wants to incorporate—but doesn’t want to lose control.

She chooses distant friends and family for her board of directors. Is this ethical? What do you think?

MBAResearch Acknowledgments Original Developers Christopher C. Burke, Sarah Bartlett Borich, MBAResearch Version 1.0 Copyright © 2011 MBA Research and Curriculum Center®

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