Entrepreneurship 110 Legal Forms of Business

3 Main Forms The three main legal forms of business are: - sole proprietorship - partnership (general and limited) - corporation

1. Sole Proprietorship  A sole proprietorship is a business owned by one person.  It is the oldest, simplest and most common form of business.  The business and individual are not recognized as separate by law – you are the business. AdvantageDisadvantage - You are in complete control of the business and get to make all decisions. - It may be more difficult to obtain all of the financing you need.

2. Partnerships General Partnership - Two or more people own the business. - Ownership and authority are shared evenly between all partners (perhaps 50/50). AdvantageDisadvantage - You can pool resources, including skills and resources (i.e. Finances). - Less control. You give up some of the control over decision making when you enter into a partnership.

Partnerships Limited Partnership - Two or more people own the business. - Ownership for each partner is limited to the amount that was invested in the company by each partner. - Legally, there must be at least one general partner who has unlimited authority. AdvantageDisadvantage - You can pool resources, including skills and resources (i.e. Finances). - Only the general partners have decision making authority.

Partnership Agreements Typically include: - Name of partners - Name of business - Amount of capital invested by each partner - Outline of each partner’s responsibilities and what each can and cannot do without the approval of the other partners. - Procedures for termination of the partnership - Procedures for dispute resolution among partners - Etc.

3. Corporations  Most formal and complex form of business  Unlike with a sole proprietorship or partnership, corporations are separate legal entity from its owners – legally it is regarded as a “person.”  YouTube - THE CORPORATION [3/23] A Legal "Person" YouTube - THE CORPORATION [3/23] A Legal "Person"  It can own property and other assets, it can sue or be sued, and it files its own tax return.  Ownership happens through the purchase of shares or stocks which can be held by as many as thousands of people.

Continued AdvantageDisadvantage - The shareholder is only liable for the amount he or she paid for shares. - In case of bankruptcy creditors are not able to sue shareholders for outstanding debts of the business - Cost. Expensive to start (incorporation may cost more than $1000 and lawyer fees may exceed $300

What is a CEO?  Chief executive officer; the corporate executive responsible for the operations of the business  Individual responsible for the overall operations of a corporation  The CEO is ultimately responsible for the success or failure of the business. He or she provides overall strategic direction for the business

The “Corporate Agenda”  There is distrust among many North Americans of the “corporate world.”  This is a result of many factors, including: The size of many of today’s corporations and how far removed they have become from “the people” Corporate scandals Lack of ethics among corporations THE CORPORATION [1/23] What is a Corporation? THE CORPORATION [2/23] Birth THE CORPORATION [5/23] Case Histories