business

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W hat is

Business ?

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Definitions of Business

▪ Business has three dimensionsa meaning

–A commerce–An occupation

–An organization

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▪Business as a commerce is tprocess that people produce

exchange and trade goods aservices

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▪Business as an occupation isacquired set of specialized s

and abilities that allows peocreate valuable goods andservices

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▪Business as an organization system of task and authorityrelationship that coordinates

controls the interactions betpeople so that they work towcommon goal

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▪Business as a system is acombination of businesscommerce, occupations, and

organizations that produces distributes the goods andservices that create value fopeople in a society.

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Basic forms of ownershi

▪Soleproprietorship

▪

artnership▪!orporation

▪!ooperative

"valuation !rite

• #ax considerati• $iability exposu• Start%up and fu

requirement•

!ontrol• &anagerial abi• Business goals• &anagement s

plans• !ost of formatio

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Sole Proprietorship

A business owned andmanaged by oneindividual; the business

and the owner are oneand the same in theeyes of the law

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Sole Proprietorship

Advantages•Easy and inexpensive to create.

•Owner makes all businessdecisions.

•Owner receives all prots.

•Least regulated form of businessownership.

•usiness itself pays no taxes.

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Sole Proprietorship

!isadvantages•Owner has unlimited liability for all debts and

actions of the business.

Unlimited liability "

#he debts of the business may be paid from

the personal assets of the owner.

•!i$cult to raise capital.

•%ole proprietorship is limited by his&her skills

and abilities.

•#he death of the owner automatically

dissolves the business.

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Partnership

An association of two ormore people who co'own abusiness for the purpose ofmaking a prot.

#hey also co'own the assetsand (ointly responsible forthe liabilities.

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Types of Partnerships

•General partnership" A partnership in which alpartners have unlimited personal liability and tfull responsibility for the management of thebusiness.

•Limited partnership" A partnership in which thpartners) liability is limited to their investment

• Joint venture" A partnership in which twocompanies (oin to complete a specic pro(ect. partnership ends after a specied period of tim

•Strategic alliance" A partnership in which twobusinesses work together for mutual benet.

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Partnership

Advantages•Easy to establish

•*omplementary skills

•!ivision of prots

•

Larger pool of capital•Ability to attract limited partners

•Little governmental regulation

•+lexibility

•#axation

!isadvantages

▪ ,ay lead todisagreements.

▪ %ome partners arenot willing to

responsibilities and

▪ %ome partners feaheld legally liable ferror of their partn

▪ Each owner has unliability

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Corporation

A separate legal entityapart from its owners whichreceives the right to existfrom the state in which in

which it is incorporated.

't is recognized as a separateentity from its owners.

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Corporation

Advantages▪ Limited liability of stockholders

Limited liability " Owners are liable onlyup to the amount of their investments.

▪ Ability to attract capital

▪ Ability to continue indenitely

▪ #ransferable ownership

▪ *an hire experts toprofessionally manage eachaspect of the business.

!isadvantages▪ *ost and time in i

▪ !ouble taxation

▪ -otential for dimiincentives

▪

Legal reuiremen▪ -otential loss of c

▪ *orporations are s

goveregulations than por sole proprietor

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Cooperative

A business or organization owned by andoperated for the bene)t of those using its

services. ro)ts and earnings generatedby the cooperative are distributed amongthe members, also known as user%owners.

*emocracy is a de)ning element ofcooperatives. #he democratic structure ofa cooperative ensures that it serves itsmembers+ needs.

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Corporation

Advantages▪ Less #axation.

▪ /educe *osts and0mprove -roducts and%ervices.

▪ Less disruption andmore continuity to thebusiness.

▪ !emocratic Organi1ation.

!isadvantag

▪ *apital collec

▪ Lack of ,emb-articipation

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