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SC – Business Organization (B)

SC – Business Organization (B). Lim Sei Kee @ cK. Sole proprietorship. A sole proprietorship is a business entity owned by one person who is legally responsible for the debts and taxes of the business. Sole proprietorship. Ownership: 1 owner Life: Ends when owner:

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SC – Business Organization (B)

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  1. SC – Business Organization (B) Lim SeiKee @ cK

  2. Sole proprietorship A sole proprietorship is a business entity owned by one person who is legally responsible for the debts and taxes of the business

  3. Sole proprietorship • Ownership: 1 owner • Life: Ends when owner: • Is unable to carry on, • Dies, or • Closes the firm Responsibility for business debts if firm is unable to pay: Owner

  4. ADVANTAGES • Total control • Cheap and easy to start up • Keep all the profit • Business affairs are private

  5. DISADVANTAGES • Unlimited liability • Can be difficult to raise finance • Can be difficult to enjoy economies of scale, i.e. lower costs per unit due to higher levels of production • There is a problem of continuity if the sole trader retires or dies

  6. Partnership • Ownership: 2 or more • Life: Ends when partner(s): • withdraws, • Dies, or • Closes the firm Responsibility for business debts if firm is unable to pay: Partners individually and jointly

  7. Partners must agree upon: • Amount each partner will contribute • Percentage of ownership of each partner • Share of profits of each partner • Duties each partner will perform • Debts- the responsibility each partner has for the partnership’s debts

  8. ADVANTAGES • Spreads the risk across more people • Partner may bring money and resources to the business (e.g. better premises to work from) • Partner may bring other skills and ideas to the business • Increased credibility with potential customers and suppliers

  9. DISADVANTAGES • Have to share the profits. • Less control of the business for the individual. • Disputes over workload. • Problems if partners disagree over of direction of business.

  10. Company / Corporation • A company / corporation is a publicly or privately owned business entity that is separate from its owners and has a legal right to own property and do business in its own name; stockholders are not responsible for the debts or taxes of the business

  11. Company / Corporation • Ownership: Can be thousands • Life: Continues indefinitely; ends when: -business goes bankrupt -stockholders vote to liquidate Responsibility for business debts if firm is unable to pay: Stockholders can lose only the amount invested

  12. ADVANTAGES • Limited liability • Easier to raise finance • Stable form of structure • Provides more privacy of information than an public limited company

  13. DISADVANTAGES • Greater admin costs • Public disclosure of company information (annual report & accounts + annual return) • Directors’ legal duties (set out by Companies Act)

  14. Cooperatives • The objectives are normally more focused on the members of the co-operative, the local community and the world community. Profit is not the primary objective.

  15. ADVANTAGES • Achieve a common purpose. • More power to buy or bargain

  16. DISADVANTAGES • A long, drawn out decision-making process • Co-operatives may find it difficult to raise finance • Idealistic and ethical aims may not be agreeable with all members • The aims held by many co-operatives may not lead to profits in the long run

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