PRESENTATION ON

FORMS OF BUSINESS
OWNERSHIP
 Presented
to
Course co-
ordinator:
Mrs.Umme
Kulsum
Requirements Of Starting a Business
 Capital requirements
 Risk
 Control
 Managerial abilities
 Time requirements
 Tax liability
Forms Of Business Ownership
Legal Forms of
Business

Sole Proprietorships Partnerships Corporations

General Partnership

Limited Partnership
 Sole Proprietorship
• Sole proprietorship is a ‘One Man Show’ where
an individual by his cleverness, courage,,
ability, honesty, education and co-operation
tries to make business a success.

Most common in---

Retailing
Service
Agriculture
 Advantage of Sole Proprietorship

• Easy and inexpensive to create. No formal action is

required.
• Owner makes all business decision.
• The owner receives all profits.
• The owner utilizes his ability in full to survive.
• Business itself pays no taxes.
• No legal compliments at the time of dissolving business.
• The owner has complete authority over all business activity.
 Disadvantage of Sole
Proprietorship
.
• Difficult for a single individual to raise a huge amount of
capital.
• The owner has unlimited liability for losses, debts and other
liabilities the business might develop.
• Nobody have all the skills as like as controlling, organizing,
marketing, and financial and customer relations to manage
business.
• Difficulty hiring and keeping high-achievement employees.
• Wrong decisions cause disaster to his business fortunes.
• The death of owner dissolves the business.
• Limited expertise in all areas.
 Partnership
A form of business ownership in which two
or more people share the assets, liabilities,
and profits.

Partnership offers the benefit of combined

finances as well as combined talents.
 Types Of Partnership

 General partnership: A partnership in which at least one

partner has unlimited liability; a general partner has
authority to act and make binding decisions as an owner.

 Limited partnership: A partnership with at least one

general partner, and one or more limited partners who are
liable for loss only up to the amount of their investment.
 Partnership Agreement

 Name of the business partnership.

 Type of business.
 Location of the business.
 Expected life of the partnership.
 Name of the partners and the amount of each one’s
investment.
 Procedures for distributing profits and covering losses.
 Amounts those partners will withdraw for services.
 Procedure for withdrawal of funds.
 Duties of each partner.
 Procedures for dissolving the partnership.
 Advantage Of Partnership

 Partnership is inexpensive to create.

 Shared decision making and management responsibilities
 Easier to raise capital than in a sole proprietorship.
 Few government regulations.
 Business losses are shared by all partners.
 partners can share ideas
 Partners can secure investment capital more easily and in
greater amounts.
 Flexibility to respond to changing business conditions.
 Relative freedom from government control.
 No special taxes
Disadvantage Of Partnership

 Each owner has unlimited liability

 Each partner has “agency power”
 Business ends when any partner withdraws
 Partnerships may lead to disagreements
 Some entrepreneur are not willing to share responsibilities
and profits
 Some entrepreneurs fear being held legally liable for the
error of their partners.
 Hard to leave or end partnership
 Corporation
A business that is chartered by a
state and legally operates apart from
its owner.
 Type Description
• Private Attempts to earn a satisfactory profit  
• Public Owned and run by the government.  
• Closed Stock held by only a few owners and not actively
sold on the stock market.
• Open Stock held by numerous people and actively sold on the stock
market.
• Municipal Cities and townships that carry out business.
•  
• Domestic Incorporated in one state or country and doing busines within that
state or country.
• Foreign Incorporated in one state or country and doing business in
another country or state.
• Alien Incorporated in one nation and operating in another Nation

• Nonprofit Service organization incorporated for limited liability status.  

• Single Incorporated to escape high personal income tax rate.
 Crating a corporation:

 Pick a name
 Write articles of organization
 Pay fees and taxes
 Have an organizational meeting
 Adopt by – laws, elect directors, pass
operating resolutions.
 Corporate Structure
 Stock holders
 Own the corporation
 Can sell or transfer shares at any time.
 Entitled to receive profits in the form of
dividends.

 Board of directors
 Elected by stockholders
 Govern the firm

 Officers
 Carryout the goals and policies set by the
board.
 Organizational Structure of
Corporations

Stockholders

Directors

Officers (Top
Management)
President Vice Treasurer Secretary
President
 Advantage of
corporation
 Can raise money by issuing shares of
stock.
 Offers owners limited liability.
 People can easily enter or leave the
business by buying or selling their share
of stock.
 The business can hire experts to
professionally manage each aspect of
the business.
Disadvantage of
corporation
 Formation is complex.
 Legal assistance is needed to start a
corporation.
 Start up is costly.
 A lot of paperwork is involved in
running a corporation.
 Income is taxed twice.
 Accounting and record keeping are
intricate.
 Mergers
 Combining two or more business enterprise into a
single entity is merger.

1. Horizontal merger: A merger involving

competitive firms in the same market.
2. Vertical merger: A merger in which a firm joins
with its supplier.
3. Conglomerate merger: A merger involving
firms selling goods in unrelated markets.
 Franchising
 Franchise: the right to use a specific business name
and sell its good or services in city, region, or country.

Each franchise operates as an independent business.

License to use an established brand.
Use is very restrictive-many role to be followed.
provide a proven successful business format.
Franchising: A system for selective
distribution of goods and services
under a brand name through outlets
owned by independent business
owners.

Actual granting of a franchise

Franchisee: the independent owner of
a franchise outlet who enters into an
agreement with a franchisor.
 Supplies labor and capital.
 Operates the franchised business.
 Agrees to abide by the franchise
agreement.
Franchisor: The licensing company in
the franchise arrangement.

 Supplies a known and advertised

business name.
 Supplies management skills.
 Supplies training and materials.
Supplies method of doing business.
Advantage of Owning a Franchise
Business

An established product or service is being

provided.
Franchisors often offer management, technical,

and other assistance.

Equipment and supplies may be less
  Disadvantage of Owning a
Franchise Business

The cost of franchises may be high, which can reduce

profits.
Franchise owners are limited in the decisions they can
make regarding the business.
The performance of other franchises impact on the
franchisee.
The franchise agreement may be terminated by the
franchisor.
 TYPES OF FRANCHISE
Main types of Franchise:
 Product Distribution Franchise

 Business Format Franchise

 Management Franchise
 TYPES OF FRANCHISE
Main types of Franchise:
 Product Distribution Franchise

 Business Format Franchise

 Management Franchise
Top 10 Franchises for 2011
1. Hampton Hotels [Mid-priced hotels]
2. Ampm [Convenience store & gas station]
3. McDonald's [Hamburgers, chicken, salads]
4. 7-Eleven Inc. [Convenienc]
5. Supercuts [Hair salone store]
6. Days Inn [Hotels]
7. Vanguard Cleaning Systems [Commercial cleaning]
8. Servpro [Insurance/disaster restoration & cleaning]
9. Subway [Submarine sandwiches & salads]
10. Denny's Inc. [Full-service family restaurant]