These businesses usually are owned by one person, aka the individual who has day-to-day responsibility for running the business. Sole proprietors can be independent contractors, freelancers or home-based businesses.
Your personal assets are at risk including your home in Kansas City. Tip: When looking at setting up a sole proprietorship, assess what type of liability you have. Determine what you have to lose.
Do you own a home or savings account? Your personal assets could be at risk in the case of a lawsuit. In a partnership, two or more people share ownership of a single business. Like proprietorships, the law does not distinguish between the business and its owners.
The partners should have a legal agreement that establishes how decisions will be made, how profits will be shared, how disputes will be resolved, how future partners will be admitted to the partnership, how partners can be bought out or what steps will be taken to dissolve the partnership when needed. Seek legal advice to create a partnership operating agreement to hash out all business decision possibilities, including succession or exit plans.
Several legal services in Kansas City are ready to help you every step of the way. A corporation is considered by law to be a unique entity, separate from those who own it. A corporation can be taxed, sued and enter into contractual agreements. The corporation has a life of its own and does not dissolve when ownership changes. A C-corporation is a corporation that is taxed separately from its owners. It gives the owners limited liability, which can encourage more risk-taking and potential investment.
Corporation and shareholder earnings are taxed. This entity type is required by law to have annual meetings, notify stockholders of the meeting and keep minutes of meetings. An S-corporation, also known as subchapter S-corporation, offers the owners limited liability. S-corporations do not pay income taxes; the earnings and profits are treated as distributions.
The shareholders must report their income on individual income tax returns. A limited liability company or LLC is a hybrid business structure that provides the limited legal liability of a corporation and the operational flexibility of a partnership or sole proprietorship. However, the formation is more complex and formal than that of a general partnership.
Tip: Forming an LLC requires the business owner to file legal paperwork. You may want to consult an attorney to help you with the process. A business entity is an organization that uses economic resources to provide goods or services to customers in exchange for money or other goods and services.
Business organizations come in different types and in different forms of ownership. A service type of business provides intangible products products with no physical form. Service type firms offer professional skills, expertise, advice, and other similar products. This type of business buys products at wholesale price and sells the same at retail price.
They are known as "buy and sell" businesses. They make profit by selling the products at prices higher than their purchase costs. A merchandising business buys a product and sells it without changing its form.
Examples include all distribution and retail stores such as: department store, grocery, hardware, clothes and accessories shop, consumer electronics, home furniture, appliance stores, drug stores, etc. Unlike a merchandising business, a manufacturing business buys products with the intention of using them as raw materials to make a new product.
Thus, there is transformation of the products purchased. A manufacturing business combines raw materials, labor, and overhead costs in its production process. The goods produced will then be sold to customers. Examples include:. Many companies engage in more than one type of business.
They run different departments or divisions for different purposes. Take for example a tech company that produces phones manufacturing , sells them through their distribution centers merchandising , and provides repairs and maintenance service.
A restaurant combines ingredients in making a meal manufacturing , sells a cold bottle of beer merchandising , and provides a dining venue service. If Regal tries to save some money and therefore boost its share price and your profit by intentionally not charging their fire extinguishers, and on the day a blockbuster gets released ten theaters in various states burn with accompanying human suffering and a major number of deaths, the company may go bankrupt under a flood of lawsuits and justifiable public outrage.
Corporations play a very large role in business ethics for two reasons. First, their independence from their specific owners opens questions about who—if anyone—should take moral responsibility for what the corporation does. Second, because corporations today have grown so large and powerful, because they touch all our lives in so many ways so often, the ethical questions they raise become hard to avoid.
Both these dimensions of the modern corporation, the ethical ambiguity and the potentially huge size, relate to the history of the institution. Less abstractly, the size and penetration of the Ford Motor Company can be felt just by going out on the street and watching their products pass by.
If you go to see a concert next weekend, an MTV executive may have been the one who originally pulled that group out of obscurity. The first corporations extended directly from governments. In , the English monarchy designated the British East India Company to manage international trade between the homeland and the Indian subcontinent.
Shareholders did extremely well. By the s, private enterprise was breaking away from tight governmental association; the corporation as we know it today began taking shape when individuals started claiming a right to freely associate for their economic benefit without direct governmental oversight and license.
Modern corporations are formed by a group of people who fill out the papers and register the name. In the eyes of the law, it is. Woodward, 17 U. This legal independence clears the way for owners shareholders to escape liability claims made against the corporation. Walmart, for example, is governed by a fifteen-member board, which is elected each year. The board holds two main responsibilities. The other responsibility is operational. One critical element of the corporate structure that contributes to the size is the owner-as-shareholder model.
The model allows businesses to collect large amounts of cash quickly. Simply by printing up and selling more shares, a corporation raises potentially huge sums. As long as that virtuous cycle continues, well-run corporations can grow very quickly. While all that growth is going on, the actual owners—shareholders—can be at home sitting in front of the TV.
With respect to business ethics, this adds another level of complexity to the question about who, if anyone, should be held morally responsible for what the corporation does. These two factors combined have thrust this question to the forefront of questions about ethics in the economic world: can these artificial beings called corporations themselves have moral responsibilities to go along with their legal responsibility to operate within the law? Previous Section.
Table of Contents. Next Section. Learning Objectives Distinguish and define the principal ways of organizing a business. Consider liability and ethical responsibility as they relate to different forms of businesses.
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