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Ownership Structures

Ownership Structures. Proprietorships- a single owner with unlimited liability. Partnerships- a group of owners each with unlimited liability. Corporations- owned by limited liability stockholders. Proprietorships account for almost 80% of firms

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Ownership Structures

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  1. Ownership Structures • Proprietorships- a single owner with unlimited liability. • Partnerships- a group of owners each with unlimited liability. • Corporations- owned by limited liability stockholders. Proprietorships account for almost 80% of firms Corporations account for over 90% of total revenue.

  2. Pros Easy to set up Simple decision making Profits taxed only as income Not much government regulation Cons Entire wealth at stake Horizon limited to owner Unchecked decisions Capital & labor are expensive Proprietorships

  3. Pros Easy to set up Diversified decision making Profits taxed only as income Limited regulation Cons Complex decision making Entire wealth at risk Responsible for Partner Capital & labor expensive Partnerships

  4. Pros Limited liability Low cost capital Professional management Perpetual life Long term labor contracts Cons Complex decision making Firm profits are taxed and dividends and capital gains taxed as shareholder income too. Government regulation Principle agent problem Corporation

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