Choosing a legal form of organization

Reading Practice

Language Material

Endeavour [In'dFvq'] - спроба, прагнення

Consequences ['kOnsIkwqnsIs] - наслідок

Single proprietorship – одноособове володіння

Available – що знаходиться в розпорядженні

Affect - воздействовать, влиять

Raising - позичати (гроші)

Subject - піддавати (впливу)

Assumes – брати на себе

Provides – снабжати, забезпечувати

Foreseen [fL'sJn] - передбачати

Arrangements - угода, розпорядження

Interest – процент, відсоток

Advance drawings - авансування

Consent [kqn'sFnt] - згода

Sue [sH] – переслідувати за судовим порядком

Entity ['FntItI] – економічна одиниця, суб’єкт

Capital stock – акціонерний капітал

Transfer ['trxnsfq'] - передача, передавати

Applicability - уживаність

Profit sharing - участь у прибутках

New firm planners do some serious thinking about what legal form to choose for their new endeavour. This means determining what the status of the business will be in the eyes of the law. The choice has very important consequences.

Three legal forms (1. single proprietorship, 2. partnership, 3. corporation) are available to small firms. In all cases, all three choices should be looked at carefully. Some of the factors that should affect the decision include plans for expansion, product or service being sold, needs for raising capital now and in subsequent years, liability characteristics of the planned firm, the proprietor’s available investment funds, need for continued life of the firm, alternatives for bringing desired people into the firm, and legal requirements of the particular locality.

THE SOLE PROPRIETORSHIP is a business owned and operated by one person. The owner and the business are synonymous in the eyes of the law. All assets in the firm are owned by the proprietor, subject only to the liabilities incurred in its establishment and operation. The proprietor is solely responsible for all personal and business debts and any losses incurred, assume all the firm’s risks, provides most of its capital, and provides its total management. The only requirement for its establishment is that the owner obtains any licenses required by the city, state and start operations.

The proprietorship form has several advantages, such as: 1. Simplicity of organization, 2. Owner’s freedom to make all decisions, 3. Owner’s enjoyment of all profits, 4. Minimum legal restrictions, 5. Ease of discontinuance, 6. Tax advantages.

Disadvantages of the sole proprietorship: 1. Owner’s possible lack of ability and experience, 2. Limited opportunity for employees, 3. Difficult in raising capital, 4. Limited life of the firm, 5. Unlimited liability of proprietor.

THE PARTNERSHIP is usually defined as an association of two or more persons to carry on as co-owners of a business for profit. Partnerships are based upon a partnership agreement, also known as Articles of Copartnership. Without a written agreement, the partnership does not really exist. Many circumstances arise which cannot be foreseen and therefore must be anticipated. It should cover all areas of possible disagreement among the partners. It should define the authority and the rights and duties of each partner, and the limits to such authority. It should include an agreement on how profits and losses are to be divided. Partners may make special arrangements to pay members of the firm for services rendered, interest on capital investment, time spent, or advance drawings before the balance of profits is to be divided in an agreed ratio.

Advantages of the partnership: 1. Ease of organization. 2. Combined talents, judgments, and skills. 3. Larger capital available to the firm. 4. Maximization of personal interest in the firm. 5. Definite legal status of the firm. 6. Tax advantages.

Disadvantages of the partnership: 1. Unlimited liability. 2. Limited life. 3. Divided authority. 4. Danger of disagreement.

THE CORPORATION is an association of stockholders (part owners), formed with government consent and having the power to transact business in the same manner as if it were one person. A corporation has the same right as an individual to own property, conduct business, make contracts, sue, and be sued. A corporation is a single entity (an individual person) in the eyes of the law.

Corporations are either closed or public. A small business corporation is usually a closed corporation. This means that capital stock is not sold to the public. If one of the stockholders decides to tell stock, it is usually sold to one of the other stockholders or to someone of whom they all approve. In this way, the ownership of the business is selective and controlled.

A public or open corporation offers its stock to the public. This means that its stock is available to anyone who wants to buy it. The principal owner of a public corporation is the majority stockholder.

Advantages of the corporation: 1. Limited liability. 2. Variety of skills, abilities and ideas. 3. Easy transfer of ownership. 4. Ease of expansion. 5. Unlimited existence. 6. Applicability for both large and small firms.

Disadvantages of the corporation: 1. Government regulation. 2. Profit sharing. 3. Complexity and high cost. 4. Lack of freedom of action. 5. Taxes.

Дата добавления: 2014-12-27