1 / 29

Forms of Business

Forms of Business. Chapters 27 & 28 Sole Proprietorship Partnership Corporation. Chapter 27: Sole Proprietorship. Owned & operated by 1 person Most common type of business Easiest to form Can use a fictitious name (a name that is not the owners own name)

lorant
Download Presentation

Forms of Business

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Forms of Business Chapters 27 & 28 Sole Proprietorship Partnership Corporation

  2. Chapter 27: Sole Proprietorship • Owned & operated by 1 person • Most common type of business • Easiest to form • Can use a fictitious name (a name that is not the owners own name) • Can not be a name already in use

  3. Chapter 27: Sole Proprietorship • Steps before starting a Sole Proprietorship: • Obtain a license • Get liability insurance • Formally file your company

  4. Chapter 27: Sole Proprietorship • Advantages • Ease of creation • Total control • Retention of profits • Freedom from excessive government control • Taxed just once on profits

  5. Chapter 27: Sole Proprietorship • Ease of Creation • The only thing you really need to begin a sole proprietorship is to begin operating the business • Still need to check zoning regulations • Still need to research govt. licensing requirements • Must contact IRS when hiring workers to get an employer identification number (EIN)

  6. Chapter 27: Sole Proprietorship • Total Control • All decisions are up to the sole proprietor • Can still seek advice (accounting, attorney, etc).

  7. Chapter 27: Sole Proprietorship • Retention of Profits • Means the owner keeps all of the profits the company makes • Must still pay taxes on any profits

  8. Chapter 27: Sole Proprietorship • Freedom from Too Much Government • Less paperwork is required by govt. than with other forms of business • More flexibility with this form of business

  9. Chapter 27: Sole Proprietorship • Taxation • Pay taxes on their INCOME not as a business • All profits are considered income for the sole owner of the company. • S.P.’s are taxed just once on this income

  10. Chapter 27: Sole Proprietorship • Disadvantages • Limited Capital • Unlimited Liability • Limited human resources • Limited Lifetime

  11. Chapter 27: Sole Proprietorship • Limited Capital • Capital is $$ used to finance the business • Comes from S.P.’s savings or income • Comes from loans received by S.P.

  12. Chapter 27: Sole Proprietorship • Unlimited Liability • Means the business owner is responsible for all losses experienced by business

  13. Chapter 27: Sole Proprietorship • Limited Human Resources • Typically have few employees • Causes lots of stress • Need to make decisions outside of their own expertise

  14. Chapter 27: Sole Proprietorship • Limited Lifetime • The company lives only as long as the proprietor • If a proprietor dies or sells business the company no longer exists (becomes a new company)

  15. Chapter 27: Partnership • Owned & operated by 1 person • Most common type of business • Easiest to form • Can use a fictitious name (a name that is not the owners own name) • Can not be a name already in use

  16. Forms of Business Chapter 27: Partnerships

  17. Chapter 27: Partnerships • Partnership Law created by the Uniform Partnership Act • Partnership – an association of 2+ people to carry on a business for profit • 4 advantages • More capital available • More credit available • Lighter burden of work • Partner does not have sole responsibility for loss

  18. Chapter 27: Partnerships • FORMING A GENERAL PARTNERSHIP • General partnership is when 2+ parties combine their $, labor & skills to carry on a legal business • 3 ways to form: • By agreement • By proof of existence • By estoppel

  19. Chapter 27: Partnerships • By agreement • All parties must give agreement/consent to form biz • Can be a written or oral agreement (contract!!!) • If it will last more than a year it must be in writing • Any partnership that is formed to sell, buy or lease real property must also be in writing

  20. Chapter 27: Partnerships • By agreement • Articles of Partnership is the partnership agreement or written agreement and includes: • Who agrees • Specific purpose, nature, scope and limits of the biz • Planned duration (lifetime) of the biz • Amount of $ of each partner’s original investment • Provisions regarding salaries, removing funds & splitting of profits • Terms of withdrawal from partnership

  21. Chapter 27: Partnerships • By Proof of Agreement • This simply means that the way 2+ people conduct their business demonstrates that it is a partnership • 2 things that must exist: • Sharing of profits • Conducting business together • 5 exceptions to the rule: • Repayment of debt • Wages to an employee / or rent • Annuity to the widow/widower of deceased partner • Interest on a loan • Consideration for the sale of the biz

  22. Chapter 27: Partnerships • By Estoppel • Created when someone does/says something leading a 3rd party to believe a partnership exists & is treated so by the court • This is not a real partnership • but is used by the court to prevent injustice

  23. Types of Partners Every partnership must have at least 1 general partner

  24. Chapter 27: Partnerships • TYPES OF PARTNERS • A secret partner is also a general partner and has an active role in the business but their connection to the business is secret (not known to the public) • A silent partneris a general partner who has no active role in the management of the business • A dormant partner is a combination of secret & silent. They have no active role & are unknown to public.

  25. Chapter 27: Partnerships • Partnership Property • Property of the partnerships is separate from that owned by the business (unlike sole proprietorship) • Property is considered owned by the biz if: • Property contributed directly to biz when it was created • Property was bought with partnership funds • 3 Property rights of Partners • Right to use the property • Right to manage the firm • Right to share in the profits

  26. Chapter 27: Partnerships • Making Decisions in a Partnership • Any disagreement that arises is settled by the majority. • If there is an even # of partners and the vote is split then there is no decision. • EXCEPTIONS • When a new partner is to be admitted the vote is unanimous. • When a change to the essential nature of the business is made the vote must also be unanimous

  27. Chapter 27: Partnerships • Sharing Profits • Partners share equally in profits • There is no consideration of initial capital (investment) contributed by each partner • There is no consideration of the time put in by each partner (this right is passed on to relatives of partner upon death)

  28. Chapter 27: Partnerships • Liability • Partners share equally in losses! • Joint Liability means in the event of a lawsuit all partners must be sued together THIS IS THE **BIGGEST DISADVANTAGE** • Even personal property/assets can be taken should debts be owed. Even an innocent partner can be held responsible. • EXCEPTION: Limited Liability Partner

  29. Chapter 27: Partnerships • Dissolving A Partnership • Dissolution is legal detachment (partnerships it is a change in the relationships of the partners) • NOT the same as a termination/ending of a business • Partnerships end by: • Death of a partner • Voluntary withdrawal of a partner • Court decree • When 1 partner stops association with the biz

More Related