Unit 8 Organization (Book 3)• Basic concepts of forms of business ownership• Language associated with business ownership

Forms of Business Ownership

• Sole proprietorship (sole trader) — ownership and, usually, operation of

an organization by one person• Partnership — business operated by two or more

people as co-owners• Corporation (limited company) — legal entity with authority to act and

incur liability separate from its owners

Sole proprietorship

• p.63• sole proprietor: the owner of a

sole proprietorship

Partnership

• a traditional form of ownership for professionals offering services, such as physicians, dentists (practices), lawyers, accountants (law/accounting firms).

• p.63

Corporation

Two types:• private limited company (privately

held): ownership is restricted to a small group of investors.

• public limited company (publicly held): shares can be easily purchased or sold by investors.

plc.

p.63

Corporation

• stockholder/shareholder: acquiring shares of stock in a corporation; part-owner of the business

• subsidiary: corporation with all or a majority of its stock owned by another corporation

• parent company: corporation that owns all or a majority of the stock in another corporation (a subsidiary)

• Inc. or Incorporated: common in US• Ltd. or Limited: common in Canada and UK • Pty. Ltd. or Proprietary Limited: in Australia• stock company: in Scandinavia

Levels of corporation management

• Stockholders (elect board of directors)• Board of Directors (set overall policy; hire CEO)• Top Management (manage overall operations; make

major decisions )• Middle Management (manage operations)• Supervisory Management (coordinate day-to-day operations; supervise employees)

Questions

• p.63

Exercise

• Assume you are a management consultant. For each of the following situations, recommend an appropriate form of business ownership:

a. Four physicians wish to start a practice together, and each wants to have limited liability.

b. A friend wants to open her own convenience store.

c. An entrepreneur wants to acquire a large steel business in the United States.

Obtaining ownership

• Obtaining ownership of an existing business:

1. Assuming ownership of a family business

2. Franchising3. M&A

Franchising

- franchise: the right granted by a franchisor to a

franchisee to sell products/services of the franchisor using its business name and often its business format and system, usually in a specific territory

- franchising: the establishment, granting, or use of a franchise; a business mode

- to join an existing business

Franchising

- A franchise can be formed as a sole proprietorship, partnership, or corporation.