Professional Documents
Culture Documents
Lecture No: 17
Resource Person:
Malik Jawad Saboor
Assistant Professor
Department of Management Sciences
COMSATS Institute of Information Technology
Islamabad.
Previous Lecture Review
• Entrepreneurs in Action
• Sole Proprietorship
• Partnership
• Corporation
Advantages of the Sole Proprietorship
• Simple to create
• Least costly form to begin
• Profit incentive
• Total decision-making authority
• No special legal restrictions
• Easy to discontinue
Disadvantages of the Sole Proprietorship
Sole Proprietorship
Claims
Claims of
of Sole
Sole Proprietor’s
Proprietor’s Creditors
Creditors
Sole
Sole Proprietor’s
Proprietor’s Personal
PersonalAssets
Assets
Partnership
• An association of two or more people who co-
own a business for the purpose of making a
profit.
• Always wise to create a partnership
agreement.
• Best partnerships are built on trust and
respect.
ELEMENTS OF GOOD PARTNERSHIP
AGREEMENT
• What is the financial contribution of each
partner?
• What is the division of work between the
partners?
• What constitutes income in the partnership?
• What property is included in the partnership
and how is it defined?
• How will/can partnership property be used by
individual partners?
ELEMENTS OF GOOD PARTNERSHIP
AGREEMENT
Partnership
Claims
Claims of
of Partnership’s
Partnership’s Creditors
Creditors
General
General Partnership’s General
General
Assets
Partnership’s Assets
Partner’s
Partner’s Partner’s
Partner’s
Personal
Personal Personal
Personal
Assets
Assets Assets
Assets
Corporation
• A separate legal entity from its owners.
• Types of corporations:
• Publicly held – a corporation that has a large
number of shareholders and whose stock usually
is traded on one of the large stock exchanges.
• Closely held – a corporation in which shares are
controlled by a relatively small number of
people, often family members, relatives, or
friends.
Advantages of the Corporation
• Limited liability of stockholders
• Ability to attract capital
• Ability to continue indefinitely
• Transferable ownership
Liability Features of the Basic Forms of Ownership
Corporation
Claims
Claims of
of Corporation’s
Corporation’s Creditors
Creditors
BBaarrr r r
riieer
r
riieerr BBaar
Corporation’s
Corporation’sAssets
Assets
Shareholder’s
Shareholder’s Shareholder’s
Shareholder’s
Personal
PersonalAssets
Assets Personal
PersonalAssets
Assets
Disadvantages of the Corporation
• Cost and time of incorporating
• Double taxation
• Potential for diminished managerial
incentives
• Legal requirements and regulatory “red
tape”
• Potential loss of control by founder(s)
You Be The Consultant..
CASE
STUDY
YOU BE THE CONSULTANT
Louise Tallman spent much of her childhood playing and working in her
mother and aunt’s antique shop. Her interest, involvement, and love of
antiques led her to attend a school of art and design. Upon graduation,
Louise decided to start her own antique shop and is in the process of
completing her business plan.
Q1. What are the questions that you would pose to Louise in order to help her select the
form of ownership for her antique shop? Please explain the relevance of each question and
answer, to determination of the suggested form of ownership.
Lecture Review