1. 05.01 Understand the Types of Ownership
BASIC BUSINESS LAW
05.01 Understand the Types of Ownership
“The business of America is business,” said Calvin Coolidge

2. Essential Questions? What is the definition of a sole proprietorship.
What is the definition of a partnership.
What is the definition of a corporation.

3. 005.01 Principal Form of Business Organization-Sole Proprietorship
Characteristics of Sole Proprietorship
Requirements for Organizing - none
Legal Status – owner is the business and it is not a separate entity.
Liability - unlimited
Management – owner makes the decisions

4. 005.01 Principal Form of Business Organization-Sole Proprietorship, continued
Characteristics of Sole Proprietorship
Dissolution – owner decides and the business terminates upon the owner’s death
Ease of formation – just do it!
Duration – death or disinterest of owner
Ability to attract professional managers - poor

5. 005.01 Sole Proprietorship I am conducted out of my home.
Is the statement (T)rue or (F)alse DIRECTIONS: Please label your paper and write the statements below. If the answer is “false,” what word or words would make it ‘true?”
I am conducted out of my home.
I am conducted in my basement.
I am conducted in my car.
I need three or four employees.
I must have a computer.
I have to purchase inventory with cash.
I don’t need a charter.
I don’t need a license.
I must have a permit to collect sales tax.

6. 005.01 Sole Proprietorship Answer Key to Activity
True-I can set up in my home.
True-My basement is a good place.
True-My car is used for selling products and services.
False-I don’t have to (can) hire employees.
False-I don’t have (need) to buy a computer.
False-I can (cannot) purchase goods/services on credit.
True-I don’t need a charter.
False-I (don’t) need to obtain a local business license.
False-I may (not) need a permit to collect sales tax in my state.

7. 005.01 Principal Form of Business Organization-Partnership
Requirements for Organizing – agreement of the parties.
Legal Status – not a separate entity in many states
Liability – unlimited liability (except limited partnership
Management – partners have equal say in management unless otherwise specified in agreement.

8. 005.01 Principal Form of Business Organization-Partnership, continued
Dissolution – terminates by agreement of partners or
upon a partner’s death, withdrawal, bankruptcy.
Ease of Formation – moderately difficult
Duration – death, bankruptcy, or withdrawal of any partner
Ability to attract professional managers – moderate.

9. Participation in the Business Relationship to the Public
Types of Partners
Kinds of Partner
Participation in the Business
Relationship to the Public
Degree of Liability
General
Active
Known
Unlimited
Secret
Unknown
Silent
Not active
Dormant
Limited

10. 005.01 Partnership Agreement
Articles of Partnership are not always legally required but is desirable.
There are more than 42 inclusions for a partnership Agreement. Make certain that it includes the following information:
Parties to the agreement
Specific nature, scope, and limits of the business
Planned duration of the business
Amount of each partner’s original investment and procedures for future investments
Provisions regarding salaries, withdrawal of funds, and the division of profits; and
Terms under which a partner may withdraw from the partnership.

11. 005.01 Legal Issues Student Activity
Do business people have to check zoning laws before opening a business?
Is it always necessary to sign papers for a partnership to exist.
Can a secret partner participate in the management of the partnership?
Does tenancy in partnership mean partners are co-owners of partnership property?
Does joint liability extend to all partners?
How are the assets of a partnership divided when partnership dissolve?

12. 005.01 I.Q. Checkup! Sole Proprietorship/Partnership
Directions: Provide the correct answer for the questions below.
In general, sole proprietors must have what type of liability for the debts of the business and for the negligent acts of all employees
How many formal requirements are there in in setting up a sole proprietorship. Is a partnership agreement is express or implied? Explain . Can Partnership property be used for personal business? Justify your answer.
Is each partner’s voice in management proportional to his or her investment.
4. Can a partner be held financially responsible for the wrongdoing of the other partners?
Who gets paid first when a partnership dissolves?
6. What is limited partnership?

13. 005.01 I.Q. Checkup! Sole Proprietorship/Partnership-ANSWER KEY
Directions: Mark true statements TRUE. If the statement is false, change the underlined word or phrase to make the state true.
In general, sole proprietors have unlimited liability for the debts of the business and for the negligent acts of all employees.
There are a few formal requirements in setting up a sole proprietorship.
Although a partnership agreement is usually express, it can be implied.
Partnership property can be used for partnership business without permission from the other partners.
Unless the partnership agreement says otherwise, each partner’s voice in management is equal to his or her investment.
A partner can be held financially responsible for the wrongdoing of the other partners.
The creditors are the first people to get paid when a partnership dissolves.
Persons who invest in a business, share in the profits, have little voice in management, and have restricted liability are involved in a limited partnership.

14. 005.01 Principal Form of Business Organization - Corporation
Requirements for Organizing –
state charter, organizational fees
Legal Status – separate entity from owners
Liability – limited liability of shareholders
Management – directors (elected by shareholders) set policy and appoint officers
Dissolution – ends when charter terminated
Ease of Formation – assistance of legal counsel required
Duration – can be perpetual
Ability to attract professional managers - excellent

15. 005.01 Types of Corporations Domestic-chartered in a specific state
Foreign-chartered in one state but doing business in another state
Alien-chartered in another nation but doing business in a state

16. 005.01 Classification of Corporations
Public-established for a governmental purpose.
Private-established by individuals for business or charitable purposes.

17. 005.01 Eight Elements of a Corporation
Name of corporation
Duration
Purpose for which the corporation is organized
Number and kinds of shares of capital stock to be authorized for issuance
Location of the principal office and name of its agent
6. Number or names and addresses of initial directors
7. Name and addresses of each incorporator
8. Any other provision consistent with the law

18. 005.02 Types of Intellectual Property
What is
Protected
Registration
Required?
Duration
Examples
Patent
Ideas, designs or
processes that are novel, nonobvious, and useful
Yes
20 years
Industrial
Chemical
Manufacturing
Processes
Prescription
drugs
Copyright
Fixed Expressions of creativity
No, but recommended
50 years
(aka 70 years past the death of the creator)
Novels, Poems, Songs, Photographs
Trademark
Distinctive mark, word, or symbol associated with a particular product
No,
but recommended
Indefinite
Logos, Emblems, Catch phrases

19. 005.02 Useful Websites for Patents, Copyrights, and Trademarks
(Compare and contrast patents, copyrights, and trademarks)