2. Basic types of business enterprise

Just as these are different types of industries, there are different forms of business organization (categories of ownership).

1. Proprietorship is a firm that has a single owner who has unlimited liability for the firm’s debts and who is the sole единственный residual claimant. оставшийся претендент

Unlimited liability is a legal term that indicates that the owner or owners of a firm are personally responsible for the debts of a firm up to the total value of their wealth.

Advantages:

his / her own boss and has substantial freedom of action and control (the primary advantage);

is easy to organize;

since profit income depends on the enterprise’s success, there is a strong and immediate incentive стимул to manage business efficiently.

Disadvantages:

rare exceptions;

financial resources are insufficient to permit позволить the firm to grow in a large enterprise, finances are usually limited;

welfare of the firm largely rests on one person.

2. A partnership is a firm that has two or more owners who have unlimited liability for the firm’s debts and who are residual claimants.

Joint unlimited liability is the unlimited liability condition in a partnership that is shared разделена by all partners.

3. Corporation is a firm that is owned by one or more individuals who hold shares of stock that indicate ownership and rights to residuals but who have limited liability.

Share is the equal portions into which the ownership of a corporation is divided.

The corporate form of business has a number of distinct characteristics that set it apart from sole proprietorships and partnerships:

1. Corporation is owned entirely by its stockholders, who have purchased of ownership in the corporation. These shares are called stocks.

2. As owners of shares of a corporation, stockholders are entitled to a share of the corporation's income. The portion of any corporate profits paid to its stockholders is called dividends.

3. Share transferability. Share transferability is the power of an individual shareholder to sell his / her portion of ownership without the approval of other shareholders.

4. Stockholders cannot be held personally liable for the debts of the corporation – limited liability. Limited liability is a legal provision that protects the owners of a corporation (its stockholders) by putting a ceiling equal to the purchase price of their stock on their liability for debts of the corporation.

5. The separation of ownership and control.

Pros and cons of corporate business

The pros include:

1. The corporate form of business allows the firm to issue both stocks and bonds as a means of raising revenue.

2. Owners of the corporation, its stockholders, have limited liability.

3. It is relatively easy for stockholders to sell their rights of ownership.

The cons include:

1. The separation of owners from managers in the corporate structure has the potential for conflicts of interest between these two groups.