Listen to the text again; check your answers; name the main idea and retell the story.

 

II. Read and translate the following text and be ready for its discussion on the basis of active vocabulary, key terms quiz, review and discussion questions.

THEY SAID IT:

“Entrepreneurs are risk takers, willing to roll the dice with their money or reputations on the line in support of an idea or enterprise. They willingly assume responsibility for the success or failure of a venture and are answerable for all its facets. The buck not only stops at their desks, it starts there too”

Victor Kiam (1926-). Chairman, Remington Products Inc.

 

There are three major forms of private ownership: sole proprietorships, partnerships, and corporations.

Sole proprietorships

The most commonform of businessownership, the sole proprietorship, is also the oldest and the simplest because there is no legal distinction between the sole proprietor as an individual and as a business owner. The business assets, earnings, and debts are those of the owner. Although sole proprietorships are common in variety of industries, they are concentrated primarily among small businesses, such as repair shops, small retail outlets, and service organizations.

Sole proprietorships offer advantages not found in other forms of business ownership. They are easy to form or dissolve and give the owner flexibility and the right to retain all profits after taxes. A minimum of legal requirements make it easy to go into and out of this form of business. Ownership flexibility is another advantage; the owner can make management decisions without consulting others, take prompt action when needed, and keep trade secrets where appropriate.

A disadvantage of the sole proprietorship is that the sole proprietor is financially liable for all debts of the business, and its financial resources are limited to the owner’s personal funds and money that can be borrowed. Financial limitations can keep the business from expanding.

Partnerships

Another opinion for organizing a business is forming a partnership, an association of two or more persons who operate a business as co-owners by voluntary legal agreement. Partnerships have been a traditional form of ownership for professionals offering a service, such as lawyers and dentists. A joint venture is a partnership formed for specific undertaking.

Partnerships are easy to form; as with sole proprietorships, the legal requirements involve merely registering the business name and taking out the necessary licenses. Another advantage is the opportunity to combine complementary skills. Partnerships also offer expanded financial capability through the combined resources of the partners.

Like the sole proprietorship, most partnerships have the disadvantage of unlimited financial liability. Each partner is responsible for the debts of the firm, and each is legally liable for the actions of the other partners.

Corporations

A corporation is a legal organization whose assets and liabilities are separated from those of its owner(s). It can be formed only with the approval of the appropriate state agency. A stockholder is someone who acquires shares of stock in a corporation, thereby becoming a part-owner of business.

Corporate ownership offers considerable advantages. First, because corporations are considered separate legal entities, the stockholders have limited financial risk; if the firm fails, they lose only the amount they have invested. Other advantages of corporations are that they can draw on the specialized skills of several employees. Expanded financial capability, another advantage, allows a corporation to grow and become more efficient than if it had been set up as a sole proprietorship or partnership. People outside the business may invest in it by buying shares, and the corporation’s size and stability make it easier for business to borrow additional funds. A large corporation can finance projects internally by transferring money from one part of the business to another.

A disadvantage of corporation is that, as separate legal entity, a corporation is a subject to federal and state taxes on its profits. In addition any dividends – payments to stockholders from profits – also are taxed on the individual basis.

Many states allow business owners to organize as a limited liability company (LLC) (private company limited by shares), which combines the corporate advantage of limited liability with the favorable tax treatment of a partnership.

 

ADVANTAGES AND DISADVANTAGES OF EACH FORM OF PRIVATE OWNERSHIP
Form of Ownership	Advantages	Disadvantages
Sole proprietorship	1. Easy to form and dissolve 2. Owner has control over all assets 3. Owners retains all profit after taxes	1. Unlimited financial liability 2. Financial limitations 3. Management deficiencies 4. Lack of continuity
Partnership	1. Easy to form 2. Complimentary management skills 3. Expanded financial capacity	1. Unlimited financial liability 2. Interpersonal conflict 3. Lack of continuity
Corporation	1. Limited financial liability 2. Specialized management skills 3. Expanded financial capacity 4. Economies of larger-scale operation	1. Difficult and costly to form and dissolve 2. Tax disadvantage 3. Legal restrictions
EACH FORM OF OWNERSHIP HAS ITS STRONG POINTS – AND AT LEAST A COUPLE OF DRAWBECKS

Corporate Management

There are generally several levels of management in corporation. The stockholders elect a board of directors, which becomes the governing authority for the corporation. Members of the board set overall policy, authorize major transactions involving the corporation, and hire the chief executive officer (CEO). The CEO and other members of top management set corporate policy, make most of the major corporate decisions, and manage the overall operations of the company. The next level is middle management, which coordinates the operational functions of the company and serves as a liaison between top management and lower levels. The bottom tier of management includes supervisory managers, who coordinate the day-to-day operations of the firm, supervise employees, assign specific tasks to the staff, and are often responsible for evaluating employees’ job performance.