1. Forms of Business Ownership
BAF3M

2. Something to Think About

3. There are three forms of business ownership. They are:
Sole Proprietorship
Partnership
Corporation

4. Interactive Description

5. Sole Proprietorship
An unincorporated business owned by a single individual.
The law does not distinguish between the business and the owner.

6. Sole Proprietorship Advantages low start-up cost
great freedom from regulation
all profits to owner
owner has complete control

7. Sole Proprietorship Disadvantages unlimited liability
difficult to raise capital
limited to owner’s knowledge
lack of continuity
profits taxed at personal rate

8. Partnership
An unincorporated business owned by more than one individual.
The law does not distinguish between the business and the owners.

9. Partnership Advantages ease of formation broader management skills
limited regulations
more capital resources

10. Partnership Disadvantages unlimited liability possible disagreements
divided authority
difficult to find partners
partners liable for each other

11. Corporation A business which is an individual in the eyes of the law.
The law views the business as a separate entity from the owner(s).

12. Public and Private Corporations
Public Corporations are traded on the Stock Exchange.
Citizens can purchase “shares” of a company.
Private Corporations: can involve more than one shareholder (owner), but it is NOT traded on the stock exchange. It does not offer shares to the public.

13. Corporation
Profits of the corporation are distributed to the shareholders by way of "dividends".
The more shares one owns, the more dividends they will receive.
example
Shareholder receives: $1,000.00
Dividends: $1.00 / share
Shareholder owns: 1000 shares

14. Corporation Advantages
limited liability of shareholders (However, directors and officers can be liable in certain circumstances.)
possible lower taxation rate
can sue / be sued in the corporate name
more prestige
continuity of business

15. Corporation Disadvantages
higher start-up costs and greater formalities
requires annual maintenance from accountant and lawyer
losses cannot offset personal income

16. Corporation Structure
Executive: (ie. President, CEO, Treasurer, Secretary.
Run the day to day operations of the business.)
Directors: (Hire executive, guide mission,
distribute profits between business & shareholders)
Shareholders: (provide capital,
elect directors, receive dividends)

17. 1. In groups of 3-4 students, answer the following Chapter Review questions: #1, 8, 9, 10, and 11.
1. List the five main activities involved in accounting. 8. Identify three kinds of businesses besides a service business. 9. List the three forms of business ownership. 10. Give examples of a routine accounting activity and a periodic accounting activity. 11. Define the accounting cycle.
Bonus Question: Explain the paradox involved in the answer to question #8.