BUS 203: BUSINESS ENVIRONMENT

Section: 03

Fall 2013
September 24, 2013

L4

Admin
Please submit completed SIS
Textbooks in the reserve?
Other issues?

Topics
Forms of Business Ownership
Hand-out on the class site

Property Rights
World Development Report 2005 - Ch 4 pp. 79-84

Economic System
Justin Paul. Business Environment, pp. 4-16

Forms of Business Ownership

There are three major forms of business ownership:
1. A Sole Proprietorship is a business that is owned, and usually
managed, by one person; it is the most common form.
2. A Partnership is a legal form of business with two or more
owners.
3. A Corporation is a legal entity with authority to act and have
liability separate from its owners. How you form your
business can make a difference in your long-term success.
How you form your business can make a difference in your
long-term success.

Forms of Business Ownership:

A Sole Proprietorship:

Advantages:
1. Ease of starting and ending
the business.

2. Being your own boss.

3. Pride of ownership.
4. Leaving a legacy behind.
5. Retention of company
profits.

6. No special taxes.

Disadvantages:
1. Unlimited liability.
2. Limited financial resources.
3. Management difficulties.
4. Overwhelming time
commitment.
5. Few fringe benefits.
6. Limited growth.
7. Limited lifespan.

Forms of Business Ownership:

A Partnership:
Types: General partnership, Limited partnership, Master limited
partnership, Limited liability partnership, etc.

Advantages:

1. More financial resources.

2. Shared management and
pooled/complementary
knowledge.
3. Longer survival.
4. No special taxes.

Disadvantages:
1. Unlimited liability.
2. Division of profits.
3.
4.

Disagreement among partners.

Difficult to terminate.

Forms of Business Ownership:

A Corporation:

Advantages:
1. Limited liability.
2. More money for investment.

3. Size.
4. Perpetual life.
5. Ease of ownership change.
6. Ease of drawing talented
employees.
7. Separation of ownership
from management.

Disadvantages:
1. Extensive paperwork.
2. Double taxation.
3. Two tax returns and filing.
4. SIZE.
5. Difficulty of termination.
6. Possible conflict with
stakeholders and board of
directors.
7. Initial cost.

Forms of Business Ownership:

Other

Corporate expansions
Mergers and acquisitions

Franchises
Franchisor & franchise

Cooperatives
Democratically controlled and managed by a board

Economics Systems:
Economic thoughts and economic systems
Pre-modern economic thought
Modern economic thought
Economic systems is a mechanism which deals with the production,
distribution and consumption od goods and services in a particular
society and comprises of people and their relationship.

1.

Market economy basis for right-wing systems, i.e., capitalism

2.

Planned or command economy basis for left-wing systems, i.e.,

communism

3.

Mixed economy the centrist economic system

Economics Systems:
Market economy of capitalism
By definition, market economy is an economic system that
operates in a free market and is not planned or controlled by a
central authority.
Capitalism: This is a economic system which is closely related to
market economies. Capitalism is grounded in the concept of free
enterprises, which argues that government intervention in the
economy should be restricted and that a free market, based on
supply and demand, will ultimately maximize consumer welfare.

Economics Systems:
Planned economy or command economy
A totalitarian system of government in which a single authoritarian
party controls state-owned means of production with the professed
aim of establishing a society with equal rights.
Main elements
1.

Cooperation

2.

Collectivization

3.

Public ownership of property

4.

Equality

5.

Central planning and peoples planning

Economics Systems:
Mixed economy
Mixed economy is followed by socialist countries where equal
importance is given to both public and private sectors.
Economists agree that this form must be adopted for the benefit of vast
majority
India and Poland example

Mixed economies entail democratic control of the economy, though

they differ over issues like the extent which an economy could involve
markets and whether control should be centralized or extensively
dispersed.