2. the Forms of Business Ownership

8/13/2019 2. the Forms of Business Ownership

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2. THE FORMS OF BUSINESS OWNERSHIP

That business does not prosper which youtransact with the eyes of others

Sir Roger LEstrange

Learning objectives!. "e#ine t$e t$ree %ost co%%on #or%s o# b&siness o'ners$i(

so)e (ro(rietors$i(* (artners$i(* an+ cor(oration2. Be a'are o# t$e a+vantages an+ +isa+vantages o# so)e

(ro(rietors$i(s,. -ras( t$e unlimited liability conce(t. /na)01e $o' t$e so)e (ro(rietors$i(s #&nction bot$ in t$e US/

an+ in t$e Re(&b)ic o# Mo)+ova

St&+0 an+ Learn t$e Wor+s

English English equivalents Romanian Russiansole proprietorship

ntreprindereindividual

partnership n!parteneriat"aso#iere

$%"&%

#orporation n! so#ietate pea#'iuni

()*&%

instan#e n! parti#ular e+a,ple" #ase

to a##ount -orph.v!

a #onstitui" arepre/enta" a se#i-ra la

%%

#orner 0ro#er1a s,all shop that sells -ood andother thin0s" esp. the one

situated near people2s houses

#aterin0 servi#esthe 3or4 o- providin0 -ood anddrin4s -or ,eetin0s or so#ialevents

applian#e store,a0a/in deele#tro#asni#e

567 *89:(

to see4 sth to as4 s; -or sth

in#o,e ta+ i,po/it pe venit :896

to 0et one2s handson sth to -ind or 0et sth

unli,ited lia;ilit1rspundereneli,itat

6


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=anitor n! #areta4er

e+pertise n!#uno>tin'e"nde,?nare

7 "(5)

to @uit to leave one2s =o;

Ahe three ,ost #o,,,on -or,s o- ;usiness o3nership in the Bnited Ctatesare the so)e (ro(rietors$i(* (artners$i(* an+ cor(oration. Dn ter,s o-

o3nership" #orporations are 0enerall1 the ,ost #o,ple+" and sole proprietorshipsare the si,plest. Dn ter,s o- or0ani/ation" ho3ever" all three usuall1 start s,alland si,ple. Co,e" li4e DEF" 0ro3 and 0ro3.

2.!. So)e Pro(rietors$i(s

/ so)e (ro(rietors$i( is a ;usiness that is o3ned and usuall1 operated! ;1one person. Cole proprietorship is the oldest and si,plest -or, o- ;usinesso3nership" and it is the easiest to start. Dn ,ost instan#es" the o3ner the soleproprietor! si,pl1 de#ides that he or she is in ;usiness and ;e0ins operations.

Co,e o- the lar0est o- toda1Gs #orporations" in#ludin0 Hord Fotor Io,pan1" J.K.Jein/ Io,pan1" and K.I. Lenne1 Io,pan1" started out as tin1 sole proprietorships.Ahere are ,ore than t3elve ,illion sole proprietorships in the Bnited Ctates.

Ahe1 a##ount -or ,ore than t3oMthirds o- the #ountr12s ;usiness -ir,s. Coleproprietorships are ,ost #o,,on in the retailin0" a0ri#ulture" and servi#eindustries. Ahus the spe#ialt1 #lothin0 shop" #orner 0ro#er1" and television repairshop do3n the street are li4el1 to ;e sole proprietorships.

Fost o- the advanta0es and disadvanta0es o- sole proprietorships arise -ro,the t3o ,ain #hara#teristi#s o- this -or, o- o3nershipN si,pli#it1 and individual#ontrol.

/+vantages o# So)e Pro(rietors$i(s

Ease and Low Cost of Formation and Dissolution Oo #ontra#ts"a0ree,ents" or other le0al do#u,ents are re@uired to start a sole proprietorship.Fost are esta;lished 3ithout even an attorne1. P state or #it1 li#ense ,a1 ;ere@uired -or #ertain t1pes o- ;usinesses" su#h as restaurants or #aterin0 servi#es"that are re0ulated in the interest o- pu;li# sa-et1. Eut ;e1ond that" a soleproprietor does not pa1 an1 spe#ial startMup -ees or ta+es. Oor are there an1,ini,u, #apital re@uire,ents.

D- the enterprise does not su##eed" or the o3ner de#ides to enter another lineo- ;usiness" the -ir, #an ;e #losed as easil1 as it 3as opened. Ireditors ,ust ;epaid" o- #ourse. Eut the o3ner does not have to 0o throu0h an1 le0al pro#edure

;e-ore han0in0 up an QRut o- EusinessQ si0n.Retention of All Profits Pll pro-its earned ;1 a sole proprietorship ;e#o,ethe personal earnin0s o- its o3ner. Ahis provides the o3ner 3ith a stron0 in#entiveto su##eedSperhaps the stron0est in#entiveSand a 0reat deal o- satis-a#tion 3henthe ;usiness does su##eed. Dt is this dire#t -inan#ial re3ard that attra#ts ,an1entrepreneurs to the sole proprietorship -or, o- ;usiness.

FlexibilityAhe sole o3ner o- a ;usiness is #o,pletel1 -ree to ,a4e de#isionsa;out the -ir,Gs operations. Tithout as4in0 or 3aitin0 -or an1oneGs approval" a soleproprietor #an s3it#h -ro, retailin0 to 3holesalin0" ,ove a shopGs lo#ation" or open


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a ne3 store and #lose an old one. P sole o3ner #an also respond to #han0es in,ar4et #onditions ,u#h ,ore @ui#4l1 than the operators o- other -or,s o-;usiness. Cuppose the sole o3ner o- an applian#e store -inds that ,an1 #usto,ersno3 pre-er to shop on Cunda1 a-ternoons. Je or she #an ,a4e an i,,ediate#han0e in ;usiness hours to ta4e advanta0e o- that in-or,ation provided thatstate la3s allo3 su#h stores to open on Cunda1!. Ahe ,ana0er o- one store in alar0e #orporate #hain ,a1 have to see4 the approval o- nu,erous ,ana0ers;e-ore ,a4in0 su#h a #han0e. Hurther,ore" a sole proprietor #an @ui#4l1 s3it#hsuppliers to ta4e advanta0e o- a lo3er pri#e" 3hereas su#h a s3it#h #ould ta4e3ee4s in a ,ore #o,ple+ ;usiness.

Possible Tax Advantages Ahe sole proprietorshipGs pro-its are ta+ed aspersonal in#o,e o- the o3ner. Ahus a sole proprietorship does not pa1 the spe#ialstate and -ederal in#o,e ta+es that #orporations pa1. Ps 1ou 3ill see later" theresult o- these spe#ial ta+es is that a #orporationGs pro-its are ta+ed t3i#e. P soleproprietorshipGs pro-its are ta+ed onl1 on#e.! Plso" re#ent #han0es in -ederal ta+la3s have resulted in hi0her ta+ rates -or #orporations than -or individuals at#ertain in#o,e levels.

e!re!y Cole proprietors are not re@uired ;1 -ederal or state 0overn,ents to

pu;li#l1 reveal their ;usiness plans" pro-its" or other vital -a#ts. Ahere-ore" #o,petitors#annot 0et their hands on this in-or,ation. R- #ourse" sole proprietorships ,ust report#ertain -inan#ial in-or,ation on their personal ta+ -or,s" ;ut that in-or,ation is 4eptse#ret ;1 ta+in0 authorities.

Disadvantages of ole Pro"rietorshi"s

#nlimited Liability Un)i%ite+ )iabi)it0 is a le0al #on#ept that holds a soleproprietor personall1 responsi;le -or all the de;ts o- his or her ;usiness. Ahis,eans there is no le0al di--eren#e ;et3een the de;ts o- the ;usiness and the de;tso- the proprietor. D- the ;usiness -ails" the o3nerGs personal propert1Sin#ludin0

house" savin0s" and other assetsS#an ;e sei/ed and sold i- ne#essar1! to pa1#reditors.Bnli,ited lia;ilit1 is thus the other side o- the o3nerM4eepsMtheMpro-its #oin. Dt

is perhaps the ,a=or -a#tor that tends to dis#oura0e 3ouldM;e entrepreneurs -ro,usin0 this -or, o- ;usiness or0ani/ation.

La!$ of Continuity Ue0all1" the sole proprietor isthe ;usiness. D- the o3nerdies or is de#lared le0all1 in#o,petent" the ;usiness essentiall1 #eases to e+ist. Dn,an1 #ases" ho3ever" the o3nerGs heirs ta4e over the ;usiness and #ontinue tooperate it" espe#iall1 i- it is a pro-ita;le enterprise.

Limited Ability to %orrow Ean4s and other lenders are usuall1 un3illin0 tolend lar0e su,s to sole proprietorships. Rnl1 one personSthe sole proprietorS#an;e held responsi;le -or repa1in0 su#h loans" and the assets o- ,ost sole

proprietors are -airl1 li,ited. Foreover" these assets ,a1 alread1 have ;een usedas the ;asis -or personal ;orro3in0 a ,ort0a0e loan or #ar loan! or -or shortMter,#redit -ro, suppliers. Uenders also 3orr1 a;out the la#4 o- #ontinuit1 o- soleproprietorshipsN Tho 3ill repa1 a loan i- the sole proprietor is in#apa#itatedV

Ahe li,ited a;ilit1 to ;orro3 #an 4eep a sole proprietorship -ro, 0ro3in0. Dt isthe ,ain reason 3h1 ,an1 ;usiness o3ners #han0e -ro, the sole proprietorship toso,e other o3nership -or, 3hen the1 need relativel1 lar0e a,ounts o- #apital.

Limited %usiness $ills and &nowledge Fana0ers per-or, a variet1 o--un#tions in#ludin0 plannin0" or0ani/in0" and #ontrollin0! in su#h areas as -inan#e"


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,ar4etin0" hu,an resour#es ,ana0e,ent" and operations. R-ten the soleproprietor is also the sole ,ana0erSin addition to ;ein0 a salesperson" ;u1er"a##ountant" and" on o##asion" =anitor.

Wven the ,ost e+perien#ed ;usiness o3ner is unli4el1 to have e+pertise in allthese areas. Ionse@uentl1" the ;usiness #an su--er in the areas in 3hi#h the o3neris less 4no3led0ea;le" unless he or she o;tains the ne#essar1 e+pertise ;1 hirin0assistants or #onsultants.

La!$ of '""ortunity for Em"loyees Ahe sole proprietor ,a1 -ind it hard toattra#t and 4eep #o,petent help. Lotential e,plo1ees ,a1 -eel that there is noroo, -or advan#e,ent in a -ir, 3hose o3ner assu,es all ,ana0erialresponsi;ilities. Pnd 3hen those 3ho are hired are read1 to ta4e on addedresponsi;ilit1" the1 ,a1 -ind that the onl1 3a1 to do so is to @uit the soleproprietorship and either 3or4 -or a lar0er -ir, or start up their o3n ;usiness.

I. O3/BUL/R4 PR/3TI3E/5 Fin+ in t$e te6t t$e 'or+s t$at are s0non0%s o#

X. ver1 s,all Y. to lureZ. la31er [. to #han0e -ro, sth to sth

\. proprietor ]. to stop^. pro,otion _. ver1 i,portant" essential`. sti,ulus X. responsi;ilit1

B5 Matc$ t$e 'or+s on t$e )e#t 'it$ t$eir +e#initions on t$e rig$tX. #ontra#t a! the a;ilit1 to #han0e ver1 @ui#4l1 in order to suit ne3 #onditionsZ. li#ense ;! ,one1 that is lent to s; ;1 a ;an4 or another -inan#ial or0ani/ation\. ta+ on sth #! a person 3ho helps or supports s; in their 3or4^. startMup -ee d! ,one1 that 1ou have saved" espe#iall1 in a ;an4`. -le+i;ilit1 e! an o--i#ial 3ritten a0ree,ent ;et3een t3o partiesY. ;usiness hours -! ,one1 that 1ou pa1 in order to set up a ne3 ;usiness[. dissolution 0! the pro-it that a #o,pan1 ,a4es

]. heir h! an o--i#ial do#u,ent that sho3s that per,ission has ;een 0iven todo" o3n or use sth_. assistant i! the a#t o- o--i#iall1 endin0 a ;usinessX. savin0s =! the hours in a da1 that a shop or #o,pan1 is openXX. loan 4! ,one1 that 1ou have to pa1 to the 0overn,entXZ. earnin0s l! a person 3ho has the le0al ri0ht to re#eive s;2s propert1 and

#ontinue the 3or4 a-ter their death

35 Fin+ in t$e te6t t$e Eng)is$ e7&iva)ents #or t$e #o))o'ing ($raseso# 'or+s

X. atelierul pentru repara'ia televi/oarelorb5%%( 57

Z. a lua de#i/iib5 c\. a #ere apro;area ,ana0eruluib%c 7c 5^. a a#hita un ,pru,utb8 7$5`. a rea#'iona la s#hi,;rile n #ondi'iile de pia'b6

75 8


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X. aM>i asu,a rspunderea adu0toare b7 %*f %%

II.3OMPREHENSION/5 W$at +o t$ese n&%bers in t$e te6t re#er to8

3; 1; !3; 1; ; "#

B5 3$oose t$e ite% t$at best co%()etes eac$ sentenceX. Fost Bnited Ctates ;usinesses are

a! #orporations;! partnerships#! sole proprietorships

Z. Bnli,ited lia;ilit1 ,eans that the o3nera! has unli,ited a;ilit1 to ;orro3;! ,ust ;e lia;le -or hisbher #o,pan1 de;ts#! #annot ;e held responsi;le -or hisbher #o,pan1 de;ts

\. Pll the -ollo3in0 are advanta0es o- a sole proprietorship WgIWLAa! the o3ner is onl1 ans3era;le to hi,sel-bhersel-

;! there is no re@uire,ent to su;,it pro-it a##ounts#! the possi;ilit1 to have #o,petent e,plo1ees^. D- a su, o- ,one1 3as lent to a sole proprietorship" the responsi;ilit1 to

repa1 the loan is assu,eda! ;1 the o3ner hi,sel-bhersel-;! ;1 the o3ner2s -a,il1 ,e,;ers#! ;1 the o3ner2s sta--

`. Ahe ,a=or -a#tor that dis#oura0es -ro, startin0 up a sole proprietorship isa! li,ited a;ilit1 to ;orro3;! unli,ited lia;ilit1#! li,ited ;usiness 4no3led0e

Y. W,plo1ees don2t 3ant to 3or4 -or a sin0le o3ner ;e#ausea! the1 are 0iven too ,an1 responsi;ilities;! the1 are not paid as the1 deserve#! the1 don2t have the #han#e to ;e pro,oted.

III. Fi)) in t$e ga(s 'it$ t$e a((ro(riate 'or+s '$ose (arts o# s(eec$are given in brac9ets in or+er to #aci)itate 0o&r tas9

X. Ahere are advanta0es o- sole proprietorships. Ou,eral!Z. Dt is and relativel1 to start and end su#h -or, o-

;usiness. Pd=e#tives!\. Pll the 0o to the o3ner o- ;usiness. Ooun!^. Ahe sole proprietor is -ree a;out ever1thin0

3hat re-ers to hisbher -ir,. er; j noun!`. Ahe sole proprietor pa1s the ta+ on his personal in#o,e.

Pdver;!Y. Ahe sin0le o3ner is sure that #o,petitors nothin0 a;out

hisbher ;usiness plans" pro-its or other vital -a#ts. er;!

I. No' +escribe t$e +isa+vantages o# a so)e (ro(rietors$i( &sing j&stone sentence #or eac$ o# t$e%.

. "IS3USSION


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X. That is a startMup -ee -or a 3ouldM;e entrepreneur in our #ountr1VZ. Ar1 to anal1/e the advanta0es and disadvanta0es o- a sole proprietorship

;1 puttin0 the, on the s#ales. Ao 1our ,ind" 3hat pan out3ei0hs k theone 3ith advanta0es or another one 3ith disadvanta0esV ive 1ourreasons.

I.FO3US ON -R/MM/R3o%(arative an+ S&(er)ative "egrees

/5 3o%()ete t$e sentences &sing a co%(arative #or%: t$e #irst one$as been +one #or 0o&

X. Dt2s too nois1 here. Ian 3e 0o so,e3here @uiterVZ. Ahis #o--ee is ver1 stron0. D li4e it a ;it \. Ahe hotel 3as ver1 #heap. D e+pe#ted it to ;e ^. D 3as surprised ho3 eas1 it 3as to 0et a loan. D thou0ht it 3ould ;e

`. mou are standin0 too near the #a,era. Ian 1ou ,ove a ;it

a3a1V

B5 Use t$e s&(er)ative +egree an+ &n+er)ine t$e correct variantX. lar0e! #o,pan1 in the 3orld is DEF" eneral Fotors" Ihr1sler!.Z. ri#h! #ountr1 in the 3orld is ussia" BCP" Uu+e,;our0!.\. tall! ;uildin0 in Wurope is in er,an1" Hran#e" reat Eritain!.^. BCP" Dndia" Ihina! has lar0e! population.`. hi0h! 3ater-all in the 3orld is in Couth P-ri#a" BCP" ene/uela!.

2.2 Partners$i(s

Learning objectives!. "e#ine t$e 'or+"artnershi"

2. ;no' +i##erent t0(es o# (artners 'it$in a (artners$i( an++isting&is$ bet'een a genera) an+ a )i%ite+ (artner,. 3o%(re$en+ t$e i%(ortance o# t$e artic)es o# (artners$i(. Be a'are o# t$e a+vantages an+ +isa+vantages o# a (artners$i(

St&+0 an+ Learn t$e Wor+sEng)is$ Eng)is$ e7&iva)ents Ro%anian R&ssian

to translate to #han0e sth into adi--erent -or,

re#eipt n! intrare" venit :to pool a uni" a pune n

#o,un*

real estate avere i,o;iliar 55&%

personal estate avere ,o;il 55&%

to in#ur de;ts a -a#e datorii 7 6prospe#tive partner 3ouldM;e partnerto -ile a depune" a pre/enta %to dra3 up a nto#,i %%Ce#retar1 o- Ctate Ce#retar de stat %%89

%(the ter,s o- thepartnership

#ondi'iileparteneriatului

% $%


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to list a -a#e o list % %%(to spell out to e+plain sth in a

#lear 3a1to ,aintain a##ounts a 'ine #onta;ilitatea % *:6fto e+tend #redit to lend ,one1#on#erned ad=! preo#upat" interesat *%(89"

7a%89

-ran#hise n! a -or,al per,ission0iven ;1 the0overn,ent to s; 3ho3ants to operate a;usiness

de#eased partner dead partner

Ahe ,a=or disadvanta0es o- a sole proprietorship ste, -ro, its oneMperson#ontrolSand the li,ited a,ount that one person #an do in a 3or4da1. Rne 3a1 toredu#e the e--e#t o- these disadvanta0es is to have ,ore than one o3ner. Fultipleo3nership translates into ,ore ti,e devoted to ,ana0in0" ,ore ,ana0e,ent e+Mpertise" and ,ore #apital and ;orro3in0 a;ilit1.

Ahe Bni-or, Lartnership P#t" 3hi#h has ;een adopted ;1 ,an1 states" de-inesa "artnershi"as an association o# t'o or %ore (ersons to act as coedinte %

treasurer n! -inan#ial ,ana0erto #arr1 out a strate01 a reali/a o strate0ie 7

%6fto report tos; a -i n su;ordinea

#uiva


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Ahere are ,ore than \.Z ,illion #orporations in the Bnited Ctates. Ahe1#o,prise onl1 a;out oneM-i-th o- all ;usinesses" ;ut the1 a##ount -or ,ore thannineMtenths o- all sales revenues and ,ore than threeM@uarters o- all ;usinesspro-its.

3or(orate o'ners$i( Aheshares o- o3nership o- a #orporation are #alledits stoc9. Ahe people 3ho o3n a #orporationGs sto#4Sand thus o3n part o- the#orporationS are #alled its stoc9$o)+ers* or so,eti,es its shareholders# Rn#ea#orporation has ;een -or,ed" it ,a1 sell its sto#4 to individuals. Dt ,a1 also issuesto#4 as a re3ard to 4e1 e,plo1ees in return -or #ertain servi#es" or as a return toinvestors in pla#e o- #ash pa1,ents!.

P #lose #orporation is a #orporation 3hose sto#4 is o3ned ;1 relativel1 -e3people and is not traded openl1 that is" in sto#4 ,ar4ets!. P person 3ho 3ishes tosell the sto#4 o- su#h a #orporation 0enerall1 arran0es to sell it privatel1" toanother sto#4holder or a #lose a#@uaintan#e.

Pn open #orporation is one 3hose sto#4 is traded openl1 in sto#4 ,ar4ets and#an ;e pur#hased ;1 an1 individual. eneral Fotors" the lar0est industrial #o,pan1in the BCP" is an e+a,ple. Fost lar0e -ir,s are open #orporations" and theirsto#4holders ,a1 nu,;er in the ,illions. Hor e+a,ple" PAzA is o3ned ;1 ,ore

than \ ,illion shareholders.

Forming a !or"oration

Ahe pro#ess o- -or,in0 a #orporation is #alled incor(oration.Ahe people 3hoa#tuall1 start the #orporation are its incorporators# Ahe1 ,ust ,a4e severalde#isions a;out the #orporation ;e-ore and durin0 the in#orporation pro#ess.

-here to )n!or"orate P ;usiness is allo3ed to in#orporate in an1 state it#hooses. Fost s,all and ,ediu,Msi/ed ;usinesses are in#orporated in the state3here the1 do the ,ost ;usiness. Jo3ever" the -ounders o- lar0er #orporations" oro- those that 3ill do ;usiness nation3ide" ,a1 #o,pare the ;ene-its provided to

#orporations ;1 various states. Co,e states are ,ore hospita;le than others" andso,e o--er lo3 ta+es and other ;ene-its to attra#t ne3 -ir,s. xela3are isa#4no3led0ed as o--erin0 the ,ost lenient ta+ stru#ture. P hu0e nu,;er o- -ir,s,ore than [`"! have in#orporated in that state" even thou0h their #orporatehead@uarters ,a1 ;e lo#ated in another state.

Pn in#orporated ;usiness is #alled a +o%estic cor(oration in the state in3hi#h it is in#orporated. Dn all other states 3here it does ;usiness" it is #alled a#oreign cor(oration. C#ars" oe;u#4" -or e+a,ple" is in#orporated in Oe3 mor4"3here it is a do,esti# #orporation. Dn the re,ainin0 -ort1Mnine states" it is a -orei0n#orporation. P #orporation #hartered ;1 a -orei0n 0overn,ent and #ondu#tin0;usiness in the Bnited Ctates is an a)ien cor(oration. ol4s3a0en" Con1" and

Ao1ota are e+a,ples o- alien #orporations.The Cor"orate Charter Rn#e a Qho,e stateQ has ;een #hosen" the in#orM

porators su;,it articles of incorporation to the se#retar1 o- state. D- the arti#les o-in#orporation are approved" the1 ;e#o,e the -ir,Gs #orporate #harter. Pcor(orate c$arter is a #ontra#t ;et3een the #orporation and the state" in 3hi#hthe state re#o0ni/es the -or,ation o- the arti-i#ial person that is the #orporation.Bsuall1 the #harter and thus the arti#les o- in#orporation! in#ludes the -ollo3in0in-or,ationN

M Hir,Gs na,e and addressM Ahe in#orporatorsG na,es and addresses


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M Ahe purpose o- the #orporationM Ahe ,a+i,u, a,ount o- sto#4 and the t1pes o- sto#4 to ;e issuedM Ahe ri0hts and privile0es o- shareholdersM Jo3 lon0 the #orporation is to e+ist usuall1 3ithout li,it!

Wa#h o- these 4e1 details is the result o- de#isions that the in#orporators ,ust,a4e as the1 or0ani/e the -ir,S;e-ore the arti#les o- in#orporation are su;,itted.Uet us loo4 at one area in parti#ularN sto#4holders2 ri0hts.

to!$holders. Rights Ahere are t3o ;asi# 4inds o- sto#4. Wa#h t1pe entitlesthe o3ner to a di--erent set o- ri0hts and privile0es. Ahe o3ners o- co%%on stoc9,a1 vote on #orporate ,atters" ;ut their #lai,s on pro-it and assets are su;ordinateto the #lai,s o- others. enerall1" an o3ner o- #o,,on sto#4 has one vote -or ea#hshare o3ned. Pll #o,,on sto#4 o3ners re#eive dividends ;ut the a,ount o- thesedividends depends on the pro-ita;ilit1 o- the #o,pan1. Ahe o3ners o- (re#erre+stoc9 usuall1 do not have votin0 ri0hts" ;ut their #lai,s on pro-it and assets ta4epre#eden#e over those o- #o,,onMsto#4 o3ners. Lre-erred sto#4 o-ten pa1s a lo3erpro-it return than #o,,on sto#4 dividends ;ut that return is -i+ed and 0uaranteed.

Lerhaps the ,ost i,portant ri0ht o- o3ners o- ;oth #o,,on and pre-erredsto#4 is to share in the pro-it earned ;1 the #orporation. Rther ri0hts in#lude ;ein0

o--ered additional sto#4 in advan#e o- a pu;li# o--erin0 +pre,e$pti)e rights-;e+a,inin0 #orporate re#ords votin0 on the #orporate #harter and attendin0 the#orporationGs annual sto#4holdersG ,eetin0" 3here the1 ,a1 e+er#ise their ri0ht tovote.

Ee#ause #o,,on sto#4holders usuall1 live all over the nation" ver1 -e3a#tuall1 attend the annual ,eetin0. Dnstead" the1 vote ;1 pro+1. P (ro60 is a le0al-or, that lists issues to ;e de#ided and re@uests that sto#4holders trans-er theirvotin0 ri0hts to so,e other individual or individuals. Ahe sto#4holder re0isters hisor her vote and trans-ers his or her votin0 ri0hts si,pl1 ;1 si0nin0 and returnin0the -or,.

'rgani+ational *eeting Ps the last step in -or,in0 a #orporation" the

ori0inal sto#4holders ,eet to ele#t their -irst ;oard o- dire#tors. Uater" dire#tors3ill ;e ele#ted or reMele#ted at the #orporationGs annual ,eetin0s.! Ahe ;oard,e,;ers are dire#tl1 responsi;le to the sto#4holders -or the 3a1 the1 operate the-ir,.

Cor"orate stru!ture

%oard of Dire!tors Ahe boar+ o# +irectors is the top 0overnin0 ;od1 o- a#orporation" and" as 3e noted" dire#tors are ele#ted ;1 the shareholders. P#orporation is an arti-i#ial person. Ahus it #an a#t onl1 throu0h its dire#tors" 3horepresent the #orporation2s o3ners. Eoard ,e,;ers #an ;e #hosen -ro, 3ithin the#orporation or -ro, outside it.

xire#tors 3ho are ele#ted -ro, 3ithin the #orporation are usuall1 its top,ana0ersSthe president and e+e#utive vi#e presidents" -or e+a,ple. Ahose 3hoare ele#ted -ro, outside the #orporation are 0enerall1 e+perien#ed ,ana0ers 3ithproven leadership a;ilit1 andbor spe#i-i# talents that the or0ani/ation see,s toneed. Dn s,aller #orporations" ,a=orit1 sto#4holders ,a1 also serve as ;oard,e,;ers.

Ahe ,a=or responsi;ilities o- the ;oard o- dire#tors are to set #o,pan1 0oalsand develop 0eneral plans or strate0ies! -or ,eetin0 those 0oals. Ahe1 are alsoresponsi;le -or the overall operation o- the -ir,.


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Cor"orate 'ffi!ers P cor(orate o##icer is appointed ;1 the ;oard o-dire#tors. Ahe #hair,an o- the ;oard" president" e+e#utive vi#e presidents" and#orporate se#retar1 and treasurer are all #orporate o--i#ers. Ahe1 help the ;oard,a4e plans" #arr1 out the strate0ies esta;lished ;1 the ;oard" and ,ana0e da1MtoMda1 ;usiness a#tivities. Leriodi#all1 usuall1 ea#h ,onth!" the1 report to the ;oardo- dire#tors. Pnd on#e ea#h 1ear" at an annual ,eetin0" the dire#tors report to thesto#4holders. Dn theor1" then" the sto#4holders are a;le to #ontrol the a#tivities o-the entire #orporation throu0h its dire#tors.

I. O3/BUL/R4 PR/3TI3E/5 Fin+ in t$e te6t s0non0%s =!


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Y. P le0al do#u,ent throu0h 3hi#h a shareholder 0ives the authorit1 toso,e other individual to vote instead o- hi, {{{{{{{{{{{.

B5 /ns'er t$e #o))o'ing 7&estionsX. That is the di--eren#e ;et3een a #lose and an open #orporationVZ. Tho are in#orporatorsV\. Th1 have ,ost P,eri#an #o,panies in#orporated in xela3areV That do

1ou 4no3 a;out this stateV^. That is the di--eren#e ;et3een do,esti#" -orei0n and alien #orporationsV`. That in-or,ation does the #orporate #harter in#ludeVY. That ri0hts do sto#4holders haveV[. Dn 1our opinion" 3hat t1pe o- sto#4 k #o,,on or pre-erred do the

sto#4holders pre-er to ;u1 and 3h1V]. That does it ,ean to vote ;1 pro+1V_. Prran0e the -ollo3in0 persons a##ordin0 to the hierar#h1 o- #orporate

stru#tureNa! #orporate o--i#ers;! sto#4holders

#! 3or4ersd! ;oard o- dire#tors.Ao 1our ,ind" #an a #orporation ;e e--e#tivel1 #ontrolled under su#h as1ste, o- levelsV

X. That are the pri,ar1 responsi;ilities o- a #orporation2s ;oard o-dire#torsV

35 Mar9 t$e state%ents 'it$ TRUE or F/LSEX. Ahe in#orporators are the pri,ar1 shareholders o- the #orporation.Z. P #orporation #hartered ;1 a -orei0n 0overn,ent in the BCP is #alled a

-orei0n #orporation.

\. Pll sto#4holders o- a #orporation have the ri0ht to vote at the #o,pan12sPnnual Feetin0.^. Ahe #hair,an o- the ;oard is a #orporate o--i#er.`. Fost lar0e -ir,s in the BCP are #lose #orporations.Y. Cto#4holders ,a1 also serve as ,e,;ers o- the ;oard o- dire#tors.[. P #orporation ,a1 #o,prise no ,ore than X ,illion shareholders.]. Eoard ,e,;ers are #hosen onl1 -ro, 3ithin the #orporation.

/+vantages o# 3or(orations

Learning objectives

!. ;no' a+vantages an+ +isa+vantages o# a cor(oration2. -ras( t$e limited liabilityconce(t

Limited LiabilityRne o- the ,ost attra#tive -eatures o- #orporate o3nershipis li,ited lia;ilit1. Wa#h o3ner2s -inan#ial lia;ilit1 is li,ited to the a,ount o- ,one1she or he has paid -or the #orporation2s sto#4. Ahis -eature arises -ro, the -a#t thatthe #orporation is itsel- a le0al ;ein0" separate -ro, its o3ners. D- a #orporationshould -ail" #reditors have a #lai, onl1 on the assets o- the #orporation" not on thepersonal assets o- its o3ners.


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Ease of Transfer of 'wnershi" Uet us sa1 that a shareholder o- a pu;li##orporation 3ishes to sell his or her sto#4. P telephone #all to a sto#4;ro4er is allthat is re@uired to put the sto#4 up -or sale. Ahere are usuall1 3illin0 ;u1ersavaila;le -or ,ost sto#4s" at the ,ar4et pri#e. R3nership is trans-erredauto,ati#all1 3hen the sale is ,ade" and pra#ti#all1 no restri#tions appl1 to thesale and pur#hase o- sto#4.

Ease of Raising Ca"italAhe #orporation is ;1 -ar the ,ost e--e#tive -or, o-;usiness o3nership -or raisin0 #apital. Ui4e sole proprietorships and partnerships"#orporations #an ;orro3 -ro, lendin0 institutions. Jo3ever" the1 #an also sellsto#4 to raise additional su,s o- ,one1. Dndividuals are ,ore 3illin0 to invest in#orporations than in other -or,s o- ;usiness ;e#ause o- the li,ited lia;ilit1 thatinvestors en=o1 and ;e#ause o- the ease 3ith 3hi#h the1 #an sell their sto#4.

Per"etual LifeEe#ause a #orporation is essentiall1 a le0al |person"} it e+istsindependentl1 o- its o3ners and survives the,. Bnless its #harter spe#i-iesother3ise" a #orporation has perpetual li-e. Ahe 3ithdra3al" death" orin#o,peten#e o- a 4e1 e+e#utive or o3ner is not #ause -or the #orporation to ;eter,inated. Cears" oe;u#4" in#orporated al,ost a #entur1 a0o" is one o- thenation2s lar0est retailin0 #orporations" even thou0h its ori0inal o3ners" i#hard

Cears and Plvah oe;u#4" have ;een dead -or de#ades."e!iali+ed *anagementA1pi#all1" #orporations are a;le to re#ruit ,ore

s4illed and 4no3led0ea;le ,ana0ers than proprietorships and partnerships. Ahis is;e#ause the1 have ,ore availa;le #apital and are lar0e enou0h to o--er#onsidera;le opportunit1 -or advan#e,ent. Tithin the #orporate stru#ture"ad,inistration" hu,an resour#es" -inan#e" sales" and operations are pla#ed in the#har0e o- e+perts in these -ields. Hor instan#e" the Ee#htel roup hired IasparTein;er0er" -or,er Ce#retar1 o- xe-ense.

"isa+vantages o# 3or(orations

Diffi!ulty and Ex"ense of FormationHor,in0 a #orporation #an ;e a relMativel1 #o,ple+ and #ostl1 pro#ess. Ahe use o- an attorne1 ,a1 ;e ne#essar1 to#o,plete the le0al -or,s and appl1 to the state -or a #harter. Iharter -ees"attorne12s -ees" the #osts o- sto#4 #erti-i#ates and re@uired re#ord 4eepin0" andother or0ani/ational #osts all add up. Ahese pa1,ents #an a,ount to thousands o-dollars -or even a ,ediu,Msi/ed #orporation. Ahe #osts o- in#orporatin0" in ;othti,e and ,one1" dis#oura0e ,an1 o3ners o- s,aller ;usinesses -ro, -or,in0#orporations.

(overnment Regulation Fost 0overn,ent re0ulation o- ;usiness is dire#tedat #orporations. P #orporation ,ust ,eet various 0overn,ent standards ;e-ore it#an sell its sto#4 to the pu;li#. Ahen it ,ust -ile ,an1 reports on its ;usinessoperations and -inan#es 3ith lo#al" state" and -ederal 0overn,ents. Dn addition" the

#orporation ,ust ,a4e periodi# reports to its sto#4holders a;out various aspe#ts o-the ;usiness. Plso" its a#tivities are restri#ted ;1 la3 to those spelled out in its#harter.

Double Taxation Bnli4e sole proprietorships and partnerships" #orporations,ust pa1 a ta+ on their pro-its. Ahen sto#4holders ,ust pa1 a personal in#o,e ta+on pro-its re#eived as dividends. Ps a result" #orporate pro-its are ta+ed t3i#eSon#e as #orporate in#o,e and a0ain as the personal in#o,e o- sto#4holders.

La!$ ofe!re!y Ee#ause open #orporations are re@uired to su;,it detailedreports to 0overn,ent a0en#ies and to sto#4holders" the1 #annot 4eep their


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operations #on-idential. Io,petitors #an stud1 these re@uired #orporate reportsand then use the in-or,ation to #o,pete ,ore e--e#tivel1. Dn e--e#t" ever1 pu;li##orporation has to share so,e o- its se#rets 3ith its #o,petitors.

I. O3/BUL/R4 PR/3TI3EFin+ in t$e te6t t$e Eng)is$ e7&iva)ents #or t$e #o))o'ing ($rases o#

'or+s

X. P revendi#a proprietatea #orpora'ieib %*%%()

Z. P e+pune a#'iunile pentru vn/areb8% () \. xoar da# n #arta #orpora'iei nu este prev/ut alt#evab% (

% () %5 ^. P #orespunde standartelor de statb%% 6%%85

%5`. P#tivit'ile stipulate n #arta #orpora'iei b%" 6

% ()Y. Hostul Finistru al Pprriib*8c9 5% *8.

II. 3OMPREHENSIONMatc$ t$e 'or+s 'it$ t$eir +e#initions

X. li,ited lia;ilit1 a! the e--e#tive ,ana0e,ent #o,,ittee o- a #orporationZ. lendin0 institutions ;! i- the #o,pan1 -ails" #reditors have a #lai, on the personal

assets o- its o3ners\. sto#4;ro4er #! the hi0hest position on a #o,pan12s ;oard o- dire#tors

^. unli,ited lia;ilit1 d! i- the #o,pan1 0oes ;an4rupt" the shareholders #annot ;e as4edto pa1 ,ore than the no,inal value o- their shares

`. dividend e! ;an4s" insuran#e #o,panies" ;uildin0 so#ietiesY. ,ana0e,ent -! a person 3ho ;u1s and sells sto#4s -or other people

[. #hair,an 0! an a,ount o- the pro-its that a #o,pan1 pa1s to its shareholders

]. ;oard o- dire#tors h! the people 3ho run and #ontrol an or0ani/ation

DII. 3o%()ete t$e tab)e 'it$ t$e a((ro(riate 'or+s +escribing t$e()&ses an+ %in&ses o# t$e cor(oration stat&s. =Fig&res +enote t$en&%ber o# 'or+s5

/+vantages "isa+vantages

X. Ui,ited X! X. Dts pro-its are Z!Z. Bnli,ited X! Z. xi--i#ult and Z!\. Bnli,ited a;ilit1 X! \. Dts a#tivities are #ontrolled ;1 X!^. P;ilit1 to re#ruit Z! ^. D,possi;ilit1 to 4eep its Z!

`. Ua#4 o- di--i#ult1 in Z!

I. FO3US ON -R/MM/R3o%()ete t$e sentences &sing an a+jective #ro% bo6 / an+ a

(re(osition #ro% bo6 B/ B

si,ilar o- interested 3ith

#riti#al -or0ood a;out


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responsi;le -ro,serious atsatis-ied to;indin0 indi--erent on

X. Iould 1ou tell ,e 3ho is #usto,er

#o,plaintsVZ. F1 #urrent =o; is ver1 ,1 previous one.\. Uast ,onth the #o,pan12s sales dropped dra,ati#all1. Ahis is onl1

a slu,p re0istered ` 1ears a0o.^. Rur shareholders are 0reatl1 the pro-it and loss a##ount

3e pu;lish t3i#e a 1ear.`. Ahe #hair,an opened the ,eetin0 ;1 sa1in0 he 3as

the pro0ress ,ade.Y. Ahe press 3ere the #o,pan1 ;e#ause sta--

trainin0 had not i,proved.[. F1 ,ana0er is -irin0 Z people.]. Ao, 3as appointed as president o- our #orporation ;e#ause he is ver1

leadin0 and ,otivatin0 people._. Ahe #ontra#t #o,es into -or#e on the da1 o- its si0nature and is

;oth parties.

REISION

Learning objectives!. Un+erstan+ t$e basic +i##erences a%ong t$e , #or%s o# b&siness

o'ners$i(2. -ive arg&%ents #or t$eir c$oice o# t$e %ost a+vantageo&s #or%

o# b&siness o'ners$i(

I. Fi)) in t$e ga(s 'it$ t$e necessar0 'or+sEusinesses are or0ani/ed in di--erent 3a1s. Then there is one o3ner" the

#o,pan1 is #alled a {X! proprietorship. D- t3o or ,ore people asso#iate to -or, a#o,pan1 the1 ,a4e up a {Z!. Dn ;oth these or0ani/ations the {\! suppl1 the#apital and as a rule the1 assu,e the ,ana0e,ent o- the or0ani/ation. Ahe1 alsohave {^! lia;ilit1 and are entitled to ta4e possession o- all the pro-its the

#o,pan1 ,a4es and all { `! are ;orne ;1 the,.Rn the other hand there are li,ited {Y! #o,panies. Cu#h t1pes o- #o,paniesare either {[! or pu;li#. Ahe -or,er t1pe involves that the pu;li# has not {]! tothe #o,pan1" the shares are sold to a restri#ted nu,;er o- people. {_! are theparts into 3hi#h the assets o- a #o,pan1 are divided. Ahe o3ners o- the #o,pan1are {X! and the1 hold shares in proportion 3ith the {XX! the1 invested in the#o,pan1. Ahe ,ana0e,ent o- li,ited lia;ilit1 #o,pan1 is entrusted to a {XZ! o-dire#tors ele#ted ;1 the {X\! at the Pnnual Feetin0. P shareholder 3ho #annotattend the ,eetin0 ,a1 vote ;1 {X^!.


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Ahe shareholders are entitled to the {X`! ,ade ;1 the #o,pan1 andthere-ore re#eive {XY!. Then a sto#4holder is o--ered additional sto#4 in advan#eo- pu;li# it ,eans that he has a {X[! ri0ht.

II. W$at is t$e &s&a) anton0% in t$e #o))o'ing (airs8X. 0eneral partner andZ. #o,,on sto#4 and\. private #orporation and^. shortMter, -inan#in0 and`. -or,ation andY. to ;orro3 and[. e,plo1er and]. pro-it and

III. 3o%()ete t$e #o))o'ing c$art

Chara!teristi!s ole

"ro"rietorshi"

Partnershi" Cor"oration

X. Ahe nu,;er o- o3ners

Z. Rr0ani/ational do#u,ents

\. Aa+es paid

^. Uia;ilit1

`. P;ilit1 to ;orro3

Y. overn,ent #ontrol

[. Ahe ,ost 3idespread -or,o- doin0 ;usiness]. Ahe ,ost pro-ita;le -or,o- doin0 ;usiness

I. "IS3USSIONX. That 4ind o- or0ani/ation 3ould 1ou li4e to 3or4 -or as an e,plo1ee! in

the -utureVZ. That do 1ou thin4 1our -irst position 3ill ;eV\. xo 1ou e+pe#t to have one i,,ediate ;oss" to 3or4 -or ,ore than one

superior" or to ;e part o- a tea,V^. Tould 1ou li4e to 3or4 -or an or0ani/ation 3here ,ana0ers and 3or4ers

are treated as e@uals or in a #o,pan1 in 3hi#h there are status s1,;olssu#h as ;i0 o--i#es and #o,pan1 #ars -or senior sta--V ive 1our reasons.

`. Dn P,eri#an #orporations e,plo1ees are o--ered a #onsidera;leopportunit1 -or pro,otion. That are the #han#es to advan#e in ourFoldavian #orporations" sa1 -ro, a si,ple 3or4er to a ,e,;er o- the;oardV

Y. D- 1ou 3ere to start a ;usiness" 3hi#h o3nership -or, 3ould 1ou useVThat -a#tors ,i0ht a--e#t 1our #hoi#e o- o3nership -or,V


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. 3/SE STU"4D,a0ine -indin0 1oursel- in the -ollo3in0 situationN 1ou are an e+e#utive vi#e

president in a #orporation P" 3hi#h is not ver1 su##ess-ul. Pnother ;i0 #orporationM#o,petitor E 3ants to ta4e over the #orporation 1ou 3or4 in. Ahe1 propose 1ou to0ive a3a1 all the se#ret -inan#ial in-or,ation and -or this the1 pro,ise 1ou theposition o- the #hair,an o- the ;oard in the ne3 ;i0 #orporation. Eesides 1ou 3ill;e o--ered \ o- #orporation2s shares. That 3ould 1ou do in this situationV

I. RE/"IN-/rrange t$e #o))o'ing (aragra($s into a co$erent te6t an+ entit)e it

X! Pn individual li4e Jenr1 Hord ,i0ht 3ant to ;e0in a s,all enterpriseand personall1 retain total responsi;ilit1" ;ut on#e it starts to 0ro3" apartnership or a #orporation 3ould need to ;e -or,ed. Ahe 4e1 -a#tor ino3nin0 an1 #o,pan1 is the 0uarantee #alled li$ited liabilityN the o3nerso- a #o,pan1 never have to pa1 ,ore than the1 have invested in the#o,pan1. Aheir lia;ilities are li,ited. Then a #o,pan1 0oes ;an4rupt"the o3ners #an never ;e re@uired to pa1 its unpaid ;ills.

Z! Fan1 #ountries ,a4e a #lear distin#tion ;et3een pu;li# and private#o,panies" 3ith separate desi0nations su#h as P and ,;J iner,an1" or Ll# and Utd in Eritain. Lu;li# #o,panies are those lar0eenou0h to have their shares traded on sto#4 e+#han0es. Ahe shares o-privatel1 o3ned #o,panies are not availa;le to the 0eneral pu;li#. Dn theBCP the distin#tion ;et3een pu;li# and private #o,panies is not so 0reat"that is 3h1 ,ost #o,panies si,pl1 ;ear the title Dn# or |Dn#orporated}.

\! Ahe heart o- #apitalis, is private o3nership and a Ui,ited Uia;ilit1Io,pan1 allo3s people to o3n al,ost an1thin0 k -ro, s41s#rapers totelevision stations k 3ithout ris4in0 their personal assets should the

#o,pan1 0o ;an4rupt.^! Ahe na,es o- #o,panies around the 3orld re-le#t this 0uarantee o-

li,ited lia;ilit1. Ahe a;;reviations |,;J} in er,an1" |Dn#} in the BCP"or |Utd.} in ,ost other Wn0lishMspea4in0 #ountries" |CU} in Foldova ando,ania indi#ate that the -ir, is li,ited lia;ilit1 #o,pan1 and investorshave nothin0 ,ore to lose than the ,one1 invested in their shares. Ahe|C.P.} in Hren#h and CpanishMspea4in0 #ountries also re-ers to li,itedlia;ilit1 ;1 de-inin0 shareholders as |anon1,ous}. Cin#e the identit1 o-shareholders #an ;e 4ept se#ret" the #reditors o- a ;an4rupt #o,pan1have no ri0ht to pursue the, -or the #o,pan12s unpaid de;ts.

`! Ahe 3orst that #an happen to investors in a li,ited lia;ilit1 #o,pan1 islosin0 their initial invest,ent i- the #o,pan1 -ails. E1 li,itin0 thedo3nside ris4 -or shareholders" #o,panies are a;le to attra#t investorsand raise lar0e a,ounts o- -unds throu0h sales o- shares rather than ;1;orro3in0 ,one1 at potentiall1 hi0h interest rates.

II. FO3US ON L/N-U/-EHill in to runor to doin the -ollo3in0 senten#esN

X. D {{{. -reelan#e 3or4 in ,1 spare ti,e.


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Z. D {{{.. ,1 o3n #o,pan1 -ro, ho,e.\. F1 -riend {{{{.. an a0en#1 -or #o,puter pro0ra,s.^. That do 1ou {{{{{ -or a livin0V`. Tho {{{{ the ;usiness 3hen 1ou are a3a1VY. D have ;een {{{{{.. ;usiness 3ith this Hren#h -ir, -or Z 1ears.[. Ahe ;usiness doesn2t{{{{. itsel-" 1ou 4no3~]. Ahe #olle0e {{{ lan0ua0e #ourses -or -orei0n students._. Rur van {{{ on diesel.X. Ahe #ar 3as {{{{{.. _ ,iles an hour.

Documents

2. the Forms of Business Ownership