Learning Activity #1: Forms of Business Ownership

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Business Finance

When owners set out to create a business they do so because they believe they can make money. Not just money to pay the bills, but money that will support the expenses of running the business, pay the people employed by the business, and a handsome profit for themselves. However, if a business owner is smart they understand there are many things that could happen to the business that are beyond their control. Drought, tornedos, regulations, supply problems, are just a few examples.

The government wants to reward the entrepreneur because as discussed in week one, the economy of a country depends on people working and spending money. The government wants to create job and has provided business owners legal methods that protects society and limits an owner’s exposure to liability that may come about because of unforeseen events, problems or other issues that can hinder a person’s desire to own a business. The legal form of business is one of the main methods government uses to encourage business ownership.

A business owner must choose from these forms to select the legal form that best fits the purpose and size of the business as well as the amount of exposure to liability the owner is willing to take.

Fill in the chart below.

Characteristic

Sole Proprietorship

General Partnership

LLP

LLC

Corporation

Joint Venture

Franchise

Liability Exposure

Tax Exposure

Owners Relationship

Purpose of Form

Example