Introduction To Entrepreneurship Chapter 3 Business Ownership 5b1i5n

FORMS of BUSINESS OWNERSHIP

Basic Forms of Business Ownership

LG1

SOLE PROPRIETORSHIPS

Advantages of Sole Proprietorships

Advantages

Disadvantages

Ease of start/end

• Unlimited liability • Limited financial resources • Management difficulty • Time commitment • Few fringe benefits • Limited growth • Limited life span

Be your own boss Pride of ownership Leave a legacy Retain profit No special taxes

MAJOR TYPES of PARTNERSHIPS Partnerships • General Partnership – • All owners share in operating the business and in assuming liability for the business’s debts.

• Limited Partnership – • A partnership with one or more general partners and one or more limited partners.

TYPES OF PARTNERS

Partnerships LG2

• General Partner – • Unlimited liability and is active in managing the firm.

• Limited Partner – • Invests money in the business but enjoys limited liability. • liability for debts is limited to amount limited partner puts into company; personal assets not at risk.

TYPES of PARTNERSHIPS Genera l

LG2

Limite d

GP GP

Partnerships

GP

ive Investor

GP

GP ive Investo r

ive Investor

PARTNERSHIPS

Advantages & Disadvantages of Partnerships

LG2

Advantages • More financial resources • Shared management • Longer survival • No Special Taxes

Disadvantages • Unlimited liability • Division of profits • Disagreements among partners • Difficult to

PICK YOUR PARTNER WISELY (Spotlight on Small Business)

There is no such thing as a perfect partner but ask these questions when you try to find your best match: • • • • • • •

Do you share the same goals? Do you share the same vision for the company? What skills does he/she have? Are yours the same? What can he/she bring to the business? What type of decision maker is he/she? Do you trust each other? How does he/she problem solve?

• Private

limited

company • Public company

limited

Review Only

PROGRESS ASSESSMENT

Progress Assessment

• Most people who start businesses in the Malaysia are sole proprietors. What are the advantages and disadvantages of sole proprietorships? • Why would unlimited liability be considered a major drawback to sole proprietorships?

PROGRESS ASSESSMENT

Progress Assessment

• What’s the difference between a limited partner and a general partner? • What are some of the advantages and disadvantages of partnerships?

PROGRESS ASSESSMENT

Progress Assessment

• What are the major advantages and disadvantages of incorporating a business? • Why are so many new businesses choosing a limited liability company (LLC) form of ownership?