05.01 Understand the Types of Ownership BASIC BUSINESS LAW 05.01 Understand the Types of Ownership “The business of America is business,” said Calvin Coolidge

Essential Questions? What is the definition of a sole proprietorship. What is the definition of a partnership. What is the definition of a corporation.

005.01 Principal Form of Business Organization-Sole Proprietorship Characteristics of Sole Proprietorship Requirements for Organizing - none Legal Status – owner is the business and it is not a separate entity. Liability - unlimited Management – owner makes the decisions

005.01 Principal Form of Business Organization-Sole Proprietorship, continued Characteristics of Sole Proprietorship Dissolution – owner decides and the business terminates upon the owner’s death Ease of formation – just do it! Duration – death or disinterest of owner Ability to attract professional managers - poor  

005.01 Sole Proprietorship I am conducted out of my home. Is the statement (T)rue or (F)alse DIRECTIONS: Please label your paper and write the statements below. If the answer is “false,” what word or words would make it ‘true?” I am conducted out of my home. I am conducted in my basement. I am conducted in my car. I need three or four employees. I must have a computer. I have to purchase inventory with cash. I don’t need a charter. I don’t need a license. I must have a permit to collect sales tax.

005.01 Sole Proprietorship Answer Key to Activity True-I can set up in my home. True-My basement is a good place. True-My car is used for selling products and services. False-I don’t have to (can) hire employees. False-I don’t have (need) to buy a computer. False-I can (cannot) purchase goods/services on credit. True-I don’t need a charter. False-I (don’t) need to obtain a local business license. False-I may (not) need a permit to collect sales tax in my state.

005.01 Principal Form of Business Organization-Partnership Requirements for Organizing – agreement of the parties. Legal Status – not a separate entity in many states Liability – unlimited liability (except limited partnership Management – partners have equal say in management unless otherwise specified in agreement.

005.01 Principal Form of Business Organization-Partnership, continued Dissolution – terminates by agreement of partners or upon a partner’s death, withdrawal, bankruptcy. Ease of Formation – moderately difficult Duration – death, bankruptcy, or withdrawal of any partner Ability to attract professional managers – moderate.

Participation in the Business Relationship to the Public 005.01 Types of Partners Kinds of Partner Participation in the Business Relationship to the Public Degree of Liability General Active Known Unlimited Secret Unknown Silent Not active Dormant Limited

005.01 Partnership Agreement Articles of Partnership are not always legally required but is desirable. There are more than 42 inclusions for a partnership Agreement. Make certain that it includes the following information: Parties to the agreement Specific nature, scope, and limits of the business Planned duration of the business Amount of each partner’s original investment and procedures for future investments Provisions regarding salaries, withdrawal of funds, and the division of profits; and Terms under which a partner may withdraw from the partnership.

005.01 Legal Issues Student Activity Do business people have to check zoning laws before opening a business? Is it always necessary to sign papers for a partnership to exist. Can a secret partner participate in the management of the partnership? Does tenancy in partnership mean partners are co-owners of partnership property? Does joint liability extend to all partners? How are the assets of a partnership divided when partnership dissolve?

005.01 Legal Issues-Answer Key Yes, business people must check zoning laws before opening a business. No, an agreement is desirable but is not a requirement. Yes, they are general partners. They have active roles in management, but their connections are kept secret from the public. Yes, partners are co-owners of all partnership property. They can use partnership property for partnership business only unless they receive permission for personal use from the partners. Yes, joint liability means that, in the event of a lawsuit, all the partners must be sued together. The firm’s assets are distributed in the following order: (a) creditors other than partners, (b) loans made by partners to the firm, (c) the original money paid into the partnership, and (d) surplus owed to the partners.

005.01 I.Q. Checkup! Sole Proprietorship/Partnership Directions: Provide the correct answer for the questions below. In general, sole proprietors must have what type of liability for the debts of the business and for the negligent acts of all employees How many formal requirements are there in in setting up a sole proprietorship. Is a partnership agreement is express or implied? Explain . Can Partnership property be used for personal business? Justify your answer. Is each partner’s voice in management proportional to his or her investment. 4. Can a partner be held financially responsible for the wrongdoing of the other partners? Who gets paid first when a partnership dissolves? 6. What is limited partnership?

005.01 I.Q. Checkup! Sole Proprietorship/Partnership-ANSWER KEY Directions: Mark true statements TRUE. If the statement is false, change the underlined word or phrase to make the state true. In general, sole proprietors have unlimited liability for the debts of the business and for the negligent acts of all employees. There are a few formal requirements in setting up a sole proprietorship. Although a partnership agreement is usually express, it can be implied. Partnership property can be used for partnership business without permission from the other partners. Unless the partnership agreement says otherwise, each partner’s voice in management is equal to his or her investment. A partner can be held financially responsible for the wrongdoing of the other partners. The creditors are the first people to get paid when a partnership dissolves. Persons who invest in a business, share in the profits, have little voice in management, and have restricted liability are involved in a limited partnership.

005.01 Principal Form of Business Organization - Corporation Requirements for Organizing – state charter, organizational fees Legal Status – separate entity from owners Liability – limited liability of shareholders Management – directors (elected by shareholders) set policy and appoint officers Dissolution – ends when charter terminated Ease of Formation – assistance of legal counsel required Duration – can be perpetual Ability to attract professional managers - excellent

005.01 Types of Corporations Domestic-chartered in a specific state Foreign-chartered in one state but doing business in another state Alien-chartered in another nation but doing business in a state

005.01 Classification of Corporations Public-established for a governmental purpose. Private-established by individuals for business or charitable purposes.

005.01 Eight Elements of a Corporation Name of corporation Duration Purpose for which the corporation is organized Number and kinds of shares of capital stock to be authorized for issuance Location of the principal office and name of its agent 6. Number or names and addresses of initial directors 7. Name and addresses of each incorporator 8. Any other provision consistent with the law

005.02 Types of Intellectual Property What is Protected Registration Required? Duration Examples Patent Ideas, designs or processes that are novel, nonobvious, and useful Yes 20 years Industrial Chemical Manufacturing Processes Prescription drugs Copyright Fixed Expressions of creativity No, but recommended 50 years (aka 70 years past the death of the creator) Novels, Poems, Songs, Photographs Trademark Distinctive mark, word, or symbol associated with a particular product No, but recommended Indefinite Logos, Emblems, Catch phrases

005.02 Useful Websites for Patents, Copyrights, and Trademarks   http://www.uspto.gov/main/patents.htm http://www.uspto.gov/web/offices/pac/doc/general/whatis.htm (Compare and contrast patents, copyrights, and trademarks) http://www.thetrademarkcompany.com/