HOW A BUSINESS IS ORGANIZED

ln businesses there are many legal forms of organization. The form of organiza-
tion means the type of ownership. The main differences between the types of
ownership is in their ability to raise capital, the size and continuity of enterprise,
the disposition of profit, and the legal obligation in the event of bankruptcy. Each
form has certain advantages and disadvantages. The two forms discussed in this
lesson is the sole proprietorship and partnership.

The form which requires the least amount of capital and personnel is the sole
proprietorship. Sole means single, and the proprietors the owner. Therefore, a
sole proprietorship is a business owned and operated by a single person. This
single person can start a business by simply purchasing the necessary goods and
equipment and opening up shop. There are very few government and legal regu-
lations to comply with.

The sole proprietor has the opportunity to be successful, but the also runs the
risk of financial ruin. The sole proprietor owns all the assets of the businesses, but
He also has to supply all the capital, and his ability to borrow is limited to his per-
sonal amount of money and wealth.

A partnership presents a completely different set of problems. A partnership

consist of two or more people who share the ownership of a business. A partner-
ship should begin with a legal agreement covering the various aspects of the busi-
ness. Two important items that need to be covered are exactly which assets each
partner is contributing, as well as how the partnership can be changed or termi-
nated. This agreement is called the articles of co-partnership.

A partnership usually has more capital than a sole proprietorship. ln a partner-

ship the personal wealth of all the partners can be used to secure loans and credit.
This personal wealth may also be used to settle the debts of the business. Like
the sole proprietorship, the partnership has unlimited financial liability in the event
of bankruptcy. Unlike the sole proprietorship when one owner manager makes all
the decisions. The smooth operation of a partnership requires both owners to
agree on management policy. lf a partnership wished to cease doing business, the
owners would have to agree on how to dissolve it.

GLOSSARY
Capital (n): modal
Enterprise (n): perusahaan, firma
Obligation (n): obligasi
Proprietorship (n): kepemilikan
Purchase (v): membeli, memperoleh
Regulation (n): peraturan
Comply with (v): memenuhi .
Ownership (n): kepemilikan
Terminated (adj): diberhentikan
Cease (v): mengakhiri

A. COMPREHENSION QUESTIONS
Answer the following questions clearly.
1. ln the introductory paragraph, the author said that he would discuss two
legal forms of organization, what are they? Explain them.
2. What are the advantages and disadvantages of sole proprietorship?
3. What are the advantages and disadvantages partnership'?
4. How does sole proprietorship differ from partnership'?
5. These followings are operating of the business, except:
a. partners’ own assets.
b. debts owed.
c. making decision based on expertise of each partner.
d. assets contributed by each partner.

VOCABULARY BUILDING: Derivational Affixes

Derivational affixes are affixes that change classes of word when they are
attached to the roots and bases. A noun can be modified by adding the suffixes:
-ion, -ment, or -ence to the verb. Study the following examples:
distribute + -ion =distribution
develop + -ment = development
differ + -ence = difference

Read the paragraph above and make a list of the words which are
formed by adding the suffixes mentioned above.

ln the following sentences supply the correct verb or noun.

1. The sole proprietor can .................. for himself it he wants to form a new business.

2. The ................... can keep all of the profits of the business.

3. The proprietor made a ................ to purchase some new................................

4. The sole proprietorship, and partnership .................. in the manner in which they
raise capital.

5. lf the owner makes the wrong decision, it may ................... the business.

6. The proprietor does not ……….. with to his enterprise, because he has been
unsuccessful and he does not get any.............. from his efforts.

7. lt takes capital to purchase inventory and ................... the work shop with the
necessary tools.

8. We try to................. the customers so that they will ................... to shop here.
Match the expressions to others with similar meanings.
1. Appreciates a. takes blames or credit for
2. Comply with b. one-owner business
3. Sole proprietorship c. things of value to a business
4. Purchase d. goods
5. Assets e. business
6. Inventory f. go out of business
7. Close up shop g. follow
8. Is entitled h. is allowed by law
9. Enterprise i. buys
10. Bears responsibility j. enjoys
11. Borrow k. things he owns besides his business
12. Personal property l. use something which belongs to someone
else.

C. STRUCTURAL REVIEW: Unreal Condition at Present

This type of conditional sentence expresses the probable result of a certain
condition that we suppose or imagine. This pattern is usually called conditional
sentence type ll or unreal condition at present. The if- clause names action
that is not taking place in this moment, but we can imagine the probable result.

Study the following examples:

lf a partnership wished to cease doing business, the owners would have to
agree on how to dissolve it.
Fact: A partnership does not wish to cease doing business.
If we had enough capital, we could start doing business.
Fact: we do not have enough capital.
Study the example.
lt shows how a conditional sentence is organized. Do the verb in
order to make the complete sentence of unreal condition at
present.

Example:
X : We have money.
Y: We can buy a new car.
lf X, Y: lf we had money, we could buy a new car.
Fact: We do not have money.

1. X : We have a radio
Y : We can listen to the programs.
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2. X: We have food, shelter and clothes.
Y: We have the basic necessities of life.
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3. X :You want to get new clothes.
Y : You must earn some money.
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4. X : The economic system of a country is strong.
Y : The people will be able to satisfy their wants.
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5. X : He wants to become an economist.
Y : He must study economics books.
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6. We have a car. We can be much more mobile.
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7. You want to get a new house. You must earn a lot of money.
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8. You will complete the work more rapidly. You all work together on it.
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9. We buy these goods this week. We may be able to sell them next week,
and make some extra money.
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10. They may increase their output. Their employers provide better working
conditions.
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Combine these pairs of sentences and make them conditional

sentence Type II. You must decide whether if goes at the beginning
of the first sentence or the second.

1. He must study. He wants to become an economist.

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2. People work. They will earn money.
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3. You will make more money. You work regularly and rapidly.
_________________________________________________
4. You work together building that house. You will finish the whole thing more
rapidly.
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5. Men study the economic system of a country scientifically. We call them
economists.
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