Chapter 6
Types of Business Ownership
By Boundless
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A sole proprietorship is owned and run by one individual who receives all profits and has unlimited responsibility for all losses and debts.
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The advantages of a sole proprietorship versus other forms of organizations is the relative ease of set-up and the lower start-up costs.
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Sole proprietorships face a number of difficulties in the longer terms compared to limited liability companies.
A partnership, of which various forms exist, is an arrangement where parties agree to cooperate to advance their mutual interests.
Partnership agreements govern the relationship between the various individuals who are collaborating on a given venture.
Partnerships are easy to establish and carry many advantages, however there are risks due to the concentrated ownership structure.
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Various partnerships need to file different tax forms; it is important to understand the IRS codes before embarking on a partnership.
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Four main types of corporations are designated as C, S, limited liability companies, and nonprofit organizations.
Incorporating a business is the formation of a new corporation.
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A corporation is typically owned and controlled by its shareholders.
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Corporate structure consists of various departments and divisions that contribute to the company's overall mission and goals.
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Shareholders of a modern business corporation have limited liability for the corporation's debts and obligations.
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In many countries, corporate profits are taxed at a corporate tax rate, and dividends paid to shareholders are taxed at a separate rate -- double taxation.
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S corporations elect to pass corporate income, losses, deductions, and credit through to their shareholders for federal tax purposes.
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An LLC is a hybrid business entity which has characteristics of both a corporation and a partnership, or sole proprietorship in some cases.
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Government-owned companies are either partially or fully owned by a government and have both a distinct legal form and commercial presence.
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A nonprofit organization is an organization that uses surplus revenues to achieve goals rather than to distribute them as profit or dividends.
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There are three major types of franchises - business format, product, and manufacturing - and each operates in a different way.
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A franchise agreement can have many benefits for both the franchisor and the franchisee.
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A franchise agreement can also have disadvantages for both the franchisor and the franchisee.
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Home franchise operations have made franchising more accessible and affordable than ever, but still require knowledge and expertise.
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Advances in technology benefits franchisors, franchisees, and the end customers.
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Franchising grew greatly in 2001 to 2005, before stagnating and following the growth trend of the rest of the economy in the years that followed.
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Franchises can be a powerful strategic tool in expanding globally, which has resulted in various trends in international adoption
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A Franchise Agreement is a legal, binding contract between a franchisor and franchisee, enforced in the United States at the State level.
Cooperatives are independent and democratic organizations where each member has equal control.
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A joint venture is when two or more parties are both invested in an original concept/project in terms of money, time, and effort.
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A syndicate is a self-organizing group of individuals or entities formed to transact specific business or to promote a common interest.
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Organic growth is the process of businesses expansion due to increasing the customer base, output per customer, and/or through new sales.
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M&A refers to the aspect of corporate strategy, corporate finance, and management dealing with the buying and selling of companies.
Modern trends in M&A largely revolve around the acquisition of up-and-coming firms to enable technological advantage and global competencies for larger firms.