Chapter 6 Forms Of Business Enterprise

OWNERSHIP AND STRUCTURAL FORMS OF BUSINESS ENTERPRISEChapter 5

OWNERSHIP

It means the legal title to a thing or control over the thing owned, the right possession and disposal.

Title to and possession of the assets of the enterprise , the power to determine the policies of the operation and the right to receive and dispose of the proceeds.

TYPES OF BUSINESS OWNERSHIP

Private Ownership When an enterprise

is so organized that private individuals exercise and enjoy the rights and privileges of an owner in their own interest.

TYPES OF BUSINESS OWNERSHIP

Public Ownership Controlled by

political bodies as a municipal , provincial or national government or by any instrumentality created by them

TYPES OF BUSINESS OWNERSHIP

Mixed Ownership It exists when the

elements of ownership are divided such that private persons and public bodies share in the operation of the same enterprise

FORMS OF PRIVATE OWNERSHIP

1. Individual or single or sole proprietorship

2. Partnership3. Cooperative

Organization4. Corporation5. Corporate

combination

FACTORS INVOLVED IN BUSINESS FORMS

The nature and size of the business

The capital required and the means of procuring it

The length of time the enterprise is expected to operate

The technical conditions affecting the enterprise

The types of products to be manufactured

The method and volume of production

The kind of markets to be supplied and methods of marketing

The competitive nature of the chosen industry.

1. SINGLE PROPRIETORSHIP

The ownership is vested in one person. This form of ownership is small, requires but

little amount of capital and is readily established under the control of one man.

ADVANTAGES OF SINGLE PROPRIETORSHIP

It is easy to start and to terminate

Control and management lies entirely in the hands of the owner

Only a small amount of capital is required in starting

Profits belong entirely to the owner

High Credit Standing

DISADVANTAGES OF SINGLE PROPRIETORSHIP

Limited judgment and wisdom.

Limited amount of capital

Unlimited liability Difficulties of

Management

2. PARTNERSHIP

The business partnership is a business relationship between two or more persons competent to make contracts for the purpose of engaging in a business activity.

ADVANTAGES OF PARTNERSHIP

It could be as easily formed as the single proprietorship.

There are more persons to conduct the business and to handle its problems.

A partnership has access to greater or better credit facilities

The combined ability and resources of partners are a source of strength.

Retention of Valuable Employees

DISADVANTAGES OF PARTNERSHIP

Unlimited liability of partners

Disagreement between partners often lead to delay and difficulties which could endanger the enterprise.

Easy dissolution Frozen Investment

LIMITED PARTNERSHIP

One or more of the partners in a limited partnership must be general partners, who have unlimited liability. The limited or special partners have only limited liability, which is up to the extent of their investment.

ADVANTAGES OF LIMITED PARTNERSHIP

There is a single direction of management , thus there is unity and prompt action

The limited liability of special or limited partners , serves as good inducement of investments.

DISADVANTAGES OF LIMITED PARTNERSHIP

The unlimited power given to general partners may result in abuse.

Possibility of collusion among partners to defraud the creditors.

KINDS OF PARTNERS

1. General Partner2. Limited Partner3. Capitalist partner4. Industrial Partner5. Managing Partner6. Liquidating Partner7. Ostensible Partner8. Secret Partner9. Silent Partner

10. Dormant Partner11. Nominal Partner

COOPERATIVE ORGANIZATION

A cooperative association has some elements of a large partnership and also many features of a corporation , although it is distinct from both .

KINDS OF COOPERATIVE

The Consumer’s Cooperative It draws its members

from the general public. This cooperative carries on retail trade operations.