Forms of business organizations - PowerPoint Presentation

Slide1

Forms of business organizations

April 1, 2015

Vocabularybusiness entitybusiness vehiclelegal entityartificial person/alitylegal person/alitycorporate person/ality

How to explain similarities and differences

between

businesses

- ownership

- funding

- management

- profit

- liability

Business entities in England

Sole proprietorship

(sole trader, sole practitioner)

Partnership

general partnership

limited partnership

limited liability partnership

Company

private limited company (Ltd)

public limited company (PLC)

Sole proprietorship- a type of business entity that is owned and run by one natural person and in which there is no legal distinction between the owner and the business- the owner is in direct control of all elements

and is legally accountable for the finances of such business

- t

he

owner receives all profits (subject to taxation specific to the business) and has unlimited responsibility for all losses and debts

-

small in size, low

turnover

, few employees (if any)

Advantages and disadvantages1. advantages

-

easy

and inexpensive

to set

up

(

straightforward

registration

,

simple

record

keeping

)

-

owner

keeps

all

the

profit

after

taxes

-

easiest

way

to test

the

market

-

complete

control

of

business

(

you

are

your

own

boss

)

2.

disadvantages

-

owner

has

unlimited

personal

liability

for

the

business

- hard to

raise

money

-

complete

control

of

business

(a heavy

burden

on

your

shoulders

)

Examples- 75% of all businesses in the UK are sole traders and 73% in the USA- majority of these businesses are in the service sector (shops, plumbers, hairdressers, bed&breakfast hotels, real estate agencies…)- self-employed professionals – bookkeppers, photographers, architects, translators, freelance writers…lawyers and doctors

General partnership- a type of business entity that is owned and run by two or more natural persons

called

general

partners

-

each

partner

deemed

an

agent

(

has

actual

authority

),

each

partner

equally

participates

in

the

management

-

j

oint

and

several

liability

for

business

debts

,

taxes

and

tortious

liablity

(as

partnership

and

as

individuals

)

-

profits

shared

equally

unless

otherwise

provided

for

in

the

partnership

agreement

-

terminated

on

death

,

disability

or

withdrawal

of

one partner

unless

otherwise

provided

in

the

partnership

agreement

- 8%

of

all

businesses

in

the

UK are general

partnerships

Limited partnership- a type of business entity that is owned and run by two or more natural persons - only one partner is required to be a general partner (there can be more), others are

limited partners

- general partners have all the rights and obligations as in a general partnership

-

limited partners have limited personal liability (liable only

on debts incurred by the firm to the extent of their registered investment

),

have no management authority

,

receive a

return on investment

from general partners

Limited liability partnership- a UK LLP is a corporate body (it has a continuing legal existence independent of its members)

- all partners are limited partners – personally liable only to the extent of their investment

- all partners have joint liability, but no several liablity

- LLP pays no company tax, profit is distributed to partners and they pay income tax as self-employed individuals

Advantages and disadvantages- partners

share

profits, liabilities and

decision

making

1.

advantages

- more

partners

, more

capital

-

less

strictly

orgnaized

than

a

company

, management

is

more

flexible

-

shared

responsabilities

and

easier

decision

making

2.

disadvantages

-

agreement

-

disagreements

- profit

sharing

-

higher

taxes

with

higer

income

-

unlimited

liability

for general

partners

Private limited company (Ltd.)

- also called private company limited by

shares

- ”l

imited by shares

”

means that the company has

shareholders

, and that the liability of the shareholders to

creditors

of the company is limited to the capital originally invested

- it is a corporate body and has

perpetual life

- advantages – limited liability, no minimum capital requirement, easier disclosure requirements (SHARES ARE NOT OFFERED TO THE PUBLIC)

- 90% of all small and medium-sized companies are Ltd.

Public limited company (plc)

-

appropriate for larger businesses where SHARES ARE intended to be AVAILABLE TO THE GENERAL PUBLIC

-

a minimum share capital of £50,000, of which at least one-quarter

must be paid up before the company can obtain its

trading certificate

from

Companies House

and start trading

-

the only type of company which may raise capital by offering securities (shares or debentures) to the public

- p

ublic companies are subject to more stringent legal requirements than private companies on a wide range of matters, but especially in relation to

share capital

, directors and accounts

Business entities in the usa1. sole proprietorship2. partnership- general partnership

- limited partnership

- limited liability partnership (not in all states, in some states only for lawyers, accountants, architects)

- joint venture (acts as a general partnership but for a limited period of time or one business venture)

3. limited liability company - a business structure that combines the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation

4. corporationa) S corporation - a closely held corporation that makes a valid election to be taxed under Subchapter S of Chapter 1 of the Internal Revenue Code- do not pay any federal income taxes; i

nstead

, the corporation's income or losses are divided among and passed through to its shareholders

B) C

corporation- refers to any corporation that is taxed separately from its owners

vocabularyan agentcapitala corporationa creditora sharea shareholderturnover

Thank you!

companies Housecompany taxcorporate bodygeneral partnerincome taxjoint liabilityjoint venturelegal personlimited partnern

atural

person

partnership agreement

p

erpetual

life

s

elf-employed

professional

s

everal

liability

s

hare

capital

s

ole

practitioner

t

rading

certificate

unlimited

liability

to be accountable for somethingto incur a debtto invest capitalto own a businessto raise capitalto receive profitsto register a businessto run a businessto set up a business