Unit 8 Organization (Book 3) Basic concepts of forms of business ownership Language associated with business ownership

Forms of Business Ownership Sole proprietorship (sole trader) — ownership and, usually, operation of an organization by one person Partnership — business operated by two or more people as co-owners Corporation (limited company) — legal entity with authority to act and incur liability separate from its owners

Sole proprietorship p.63 sole proprietor: the owner of a sole proprietorship

Partnership a traditional form of ownership for professionals offering services, such as physicians, dentists (practices), lawyers, accountants (law/accounting firms). p.63

Corporation Two types: private limited company (privately held): ownership is restricted to a small group of investors. public limited company (publicly held): shares can be easily purchased or sold by investors.  plc.  p.63

Corporation stockholder/shareholder: acquiring shares of stock in a corporation; part-owner of the business subsidiary: corporation with all or a majority of its stock owned by another corporation parent company: corporation that owns all or a majority of the stock in another corporation (a subsidiary) Inc. or Incorporated: common in US Ltd. or Limited: common in Canada and UK Pty. Ltd. or Proprietary Limited: in Australia stock company: in Scandinavia

Levels of corporation management Stockholders  (elect board of directors) Board of Directors  (set overall policy; hire CEO) Top Management  (manage overall operations; make major decisions ) Middle Management  (manage operations) Supervisory Management (coordinate day-to-day operations; supervise employees)

Questions p.63

Exercise Assume you are a management consultant. For each of the following situations, recommend an appropriate form of business ownership: a.Four physicians wish to start a practice together, and each wants to have limited liability. b.A friend wants to open her own convenience store. c.An entrepreneur wants to acquire a large steel business in the United States.

Obtaining ownership Obtaining ownership of an existing business: 1.Assuming ownership of a family business 2.Franchising 3.M&A

Franchising -franchise: the right granted by a franchisor to a franchisee to sell products/services of the franchisor using its business name and often its business format and system, usually in a specific territory -franchising: the establishment, granting, or use of a franchise; a business mode -to join an existing business

Franchising -A franchise can be formed as a sole proprietorship, partnership, or corporation.