Types of Business

Ownership

Done bye :Mahmod AtrashSupervisors : Dr.Isaam Rabay3a

Entrepreneurs need to understand the advantages and disadvantages of various forms of business ownership

so they can choose the most appropriate form for their business.

Types of Business Ownership

Sole Proprietorships and Partnerships.

Corporation

Sole Proprietorship

sole proprietorship a business that is owned and operated by one person.

Note : The easiest and most popular form of business

ownership is the sole proprietorship.

Sole Proprietorship

• The owner of a sole proprietorship: receives the profitsincurs any lossesis liable for the debts of the business

Sole Proprietorship

• Advantages• Sole proprietorship is easy and inexpensive to

create. • The owner has complete authority over all business

activities.• It is the least regulated form of business ownership.• The business pays no taxes; income is taxed at

personal rate of owner.

Sole Proprietorship

Disadvantages:• The owner has unlimited liability. • Raising capital is more difficult.• The business is totally reliant on skills and abilities of

owner.• The death of owner dissolves the business unless

there is a will to the contrary.

Partnerships

• partnership a business with two or more owners who share the decisions, assets, liabilities, and profits.

• A partnership draws on skills, knowledge, and financial resources or more than one person.

General Versus Limited Partners

general partner: a participant in a partnership who has unlimited personal liability and takes full responsibility for managing the business.

limited partner a partner in a business whose liability is limited to his or her investment; a limited partner cannot be actively involved in managing the business

Note : Some partnerships include a limited partner.

Advantages:

Partnerships are inexpensive to create.General partners have complete control.

Disadvantages

• There may be personality conflicts.• Partners can be held liable for each others’ actions.

What Is a Corporation?

• corporation a business that is registered by a state and operates apart from its owners; it issues shares of stock and lives on after the owners have sold their interest or passed away

shareholders an owner of shares of stock in a corporation

Advantages

limited liability

ability to raise investment money

Disadvantages

expensive to set up

income is more heavily taxed

subject to double taxation on income

pays taxes on profits

stockholders pay taxes on dividends

Making the Decision

• Before deciding on a legal form, ask yourself key questions about:your skillscapitalexpenses

willingness to assume liabilitylevel of control wantedlength of time you expect

Any question ??

كريم رمضان