Forms of Business: Sole Proprietorships,

Partnerships, and Limited Liability Companies

 

1. One of the questions faced by anyone who wishes to start up a business is what form of business organization to choose. The options include a sole proprietorship, a partnership, a limited liability company, and a corporation. In addition to these traditional business forms, several other forms can be used to organize a business. For the most part, these special business forms are hybrid organizations – that is, they have characteristics similar to those of partnerships or corporations, or combine features of both. These forms include joint ventures, syndicates, joint stock companies, business trusts, and cooperatives.

Sole Proprietorships

2. The simplest form of business is a sole proprietorship. In this form, the owner is the business. Anyone who does business without creating an organization has a sole proprietorship. There are no requirements mandated by the government for the creation of the business. While there are still certain filings that will need to be completed – such as obtaining an Employee Identification Number from the fiscal administration (for tax purposes) and any permits for building or sales – there are no filings required for creating the business entity itself.

3. Advantages of sole proprietorships. The main benefit of a sole proprietorship is its low costs and ease of formation. Another major advantage of the sole proprietorship is that the proprietor (owner) receives all the profits. In addition, the sole proprietor is free to make any decision he or she wishes concerning the business – whom to hire, what kind of business to pursue, and so on. A sole proprietor pays only personal income taxes on profits.

4. Disadvantages of sole proprietorships. The major disadvantage of the sole proprietorship is that, as sole owner, the proprietor alone bears the burden of all liabilities incurred by the business. Another disadvantage is that the proprietor’s opportunity to raise capital is limited to personal funds and the funds of those who are willing to make loans. A sole proprietorship also lacks continuity of the business on the death of the proprietor. When the owner withdraws from business or dies, the business is automatically dissolved.

Franchises

5. Instead of setting up a business form through which to market their own products or services, many entrepreneurs opt to purchase a franchise. A franchise is defined as any arrangement in which the owner of a trademark, trade name, copyright, patent, trade secret or some form of business operation, process, or system licenses others to use that property, operation, process, or system in furnishing goods or services.

6. A franchisee (a purchaser of a franchise) is generally legally independent of the franchisor (the seller of the franchise). At the same time, the franchisee is economically dependent on the franchisor’s integrated business system. In other words, a franchisee can operate as an independent businessperson but still obtain the advantages of a regional or national organization.

7. Because a franchise relationship is primarily a contractual relationship, it is governed by contract law. The franchise contract specifies the terms and conditions of the franchise and spells out the rights and duties of the franchisor and the franchisee. The duration of the franchise is also a matter to be determined between the parties.

8. Types of Franchises. Many different kinds of businesses now sell franchises, and numerous types of franchises are available. Generally, though, the majority of franchises fall into one of three classifications: distributorships, chain-style business operations, or manufacturing or processing-plant arrangements.

9. Advantages of franchising:

– You can use a recognised brand name and trademarks. Your business is based on a proven idea. You benefit from any advertising or promotion by the owner of the franchise – the 'franchisor'.

– The franchisor gives you support – usually including training, help setting up the business, a manual telling you how to run the business and ongoing advice.

– You usually have exclusive rights in your territory. The franchisor won't sell any other franchises in the same territory.

– Financing the business may be easier. Banks are sometimes more likely to lend money to buy a franchise with a good reputation.

– Relationships with suppliers have already been established.

10. Disadvantages of franchising:

– The franchise agreement usually includes restrictions on how you can run the business. You might not be able to make changes to suit your local market.

– The franchisor might go out of business.

– Other franchisees could give the brand a bad reputation.

– You may find it difficult to sell your franchise – you can only sell it to someone approved by the franchisor.

– All profits (a percentage of sales) are usually shared with the franchisor.

– The term (duration) of a franchise agreement is usually limited and the franchisee may have little or no say about the terms of a termination.

Partnerships

11. A partnership arises from an agreement, express or implied, between two or more persons to carry on a business for profit. A partnership is based on a voluntary contract between two or more competent persons who agree to place funds, labor, and skill in a business with the understanding that profits and losses will be proportionately shared.

12. Relationships, arising in partnerships, are governed by agency law. In one important way, however, partnerships are distinct from agency relationships. In a nonpartnership agency relationship, the agent usually does not have an ownership interest in the business, nor is he or she obliged to bear a portion of the ordinary business losses.

13. There are two basic types of partnerships: general partnerships and limited partnerships. Generally, the term ‘partnership’ refers to a general partnership.

14. Elements of a partnership. There are three essential elements to a partnership:

– a sharing of profits and losses;

– a joint ownership of the business;

– an equal right in the management of the business.

15. Generally, the law of partnership recognizes a partnership as an independent entity. A partnership usually can sue or be sued, collect judgments, and have all accounting procedures in the name of the partnership entity. Partnership property may be held in the name of the partnership rather than in the names of the individual partners.

16. Advantages of the partnership. By the operation of a partnership instead of a proprietorship, capital and skill may be increased, labor may be made more efficient, the expenses of business may be reduced, and management may be improved.

17. Disadvantages of the partnership. A partnership has the following disadvantages:

– the unlimited personal liability of each partner for the debts of the partnership;

– the relative instability of the business because of the danger of dissolution by reason of the death or withdrawal of one of the partners;

– the divided authority among the partners, which may lead to disharmony.

основные источники информации: 1) Miller R.L., Cross F.B., Jentz G.A. Essentials of the Legal Environment. 3-d ed. Mason: South-Western, Cengage Learning, 2011; 2) Emerson R.W. Business Law: Business Review Books. 4-th ed. New York: Barron’s Educational Series, 2004.

6.1.1. Слова из текста:

business organization – организационные формы предпринимательства

sole proprietorship – индивидуальный предприниматель, индивидуальное частное предприятие, единоличное предприятие или собственность (неинкорпорированная компания, которая принадлежит и управляется одним человеком)

stock certificate – свидетельство на акцию; свидетельство на долю участия в акционерном капитале компании

partnership – товарищество, партнёрство (ассоциация двух и более лиц, созданная с целью ведения деловых операций)

limited liability company – акционерная компания с ограниченной ответственностью (с ответственностью участников, ограниченной номинальной суммой паёв)

business – бизнес, дело, коммерческая деятельность, коммерческое предприятие, деловое предприятие, фирма

joint venture [dʒɔınt 'ventʃər] – совместное предприятие, временное товарищество, кратковременное объединение нескольких подрядных фирм

syndicate – синдикат, консорциум

joint stock company – акционерная компания

business trust – деловой доверительный паевой фонд, промышленный траст

mandate – санкционировать

employee identification number – идентификационный номер наёмного работника

fiscal administration – налоговое ведомство

business entity – предприятие, фирма, компания, коммерческая организация, хозяйственная единица (юридическое лицо, занимающееся экономической деятельностью ради получения прибыли)

pursue – заниматься, выполнять, осуществлять

personal income tax – подоходный налог с физических лиц

make a loan – предоставлять заём, предоставлять ссуду

lack continuity – лишаться преемственности, утратить непрерывность функционирования

entrepreneur – предприниматель, хозяин мелкого предприятия, владелец предприятия

franchise ['fræntʃaız] – франчайзинг, коммерческая концессия, франчайза (соглашение, в соответствии с которым правообладатель обязуется предоставить правоприобретателю за вознаграждение на срок или без указания срока право использовать в предпринимательской деятельности правоприобретателя комплекс исключительных прав, принадлежащих правообладателю)

furnish – предоставлять, поставлять, оказывать, обеспечивать

franchisee – получатель торговой привилегии; предприятие, реализующее изделия промышленного предприятия на основе договора франшизы

franchisor – правообладатель; фирма, предоставляющая привилегию

distributorship – оптовая продажа

chain-style – сетевой

processing plant – обрабатывающее предприятие, предприятие по переработке

proven idea – апробированная концепция, проверенный план/проект

go out of business – прекратить деятельность, ликвидировать предприятие

have little or no say – быть ограниченным или не иметь права вмешиваться (в решение или обсуждение вопроса)

termination – прекращение действия, окончание срока

ownership interest – доля участия (в капитале компании), процент владения

joint ownership – совместное владение, совладение

collect judgments – взыскивать по решению суда

accounting procedures – методы ведения учёта, организация бухгалтерского учёта

withdrawal [wıð'drɔ:əl] – отказ от участия, уход

disharmony [dıs'hɑ:rmənı] – разногласие, отсутствие согласованности, разлад

6.2. Выполните следующие задания:

1) Прочитайте и переведите текст.

2) Составьте 5 ‘специальных вопросов’ к тексту, используя информацию из Приложения 3 с комментариями о структуре вопросительного предложения в английском языке. Будьте готовы в ходе занятия задать другим студентам свои вопросы по содержанию прочитанного текста.