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Text 1. Legal Forms of Business Organisation



There exist several legal forms of business organisation:sole proprietorship, partnerships, private and public joint stock companies and corporations. The simplest form of business organisation is a sole proprietorship.Sole proprietors own all the assets of the business. They have unlimited liability and are legally responsible for their debts.

In a partnership two or more individuals manage and operate the business. In fact, there exist large partnerships with thousands of partners. Partners are equally and individually liable for the debts from the business. There are two types of partnerships - general partnerships and partnerships with limited liability. Limited partnerships do not receive dividends but enjoy direct access to the flow of income and expenses. The main advantage of this structure is that owners are generally not liable for the debts of the company. As for joint ventures, they act likepartnerships but have certain peculiarities. In fact, a joint venture is a cooperation of two or more individuals or businesses to carry out thesame project in which the sides agree to share profit, loss and control in a specific enterprise for a finite time. Setting up a joint venture is the most popular form of attracting foreign capital, advanced technology and management expertise from abroad. A venture for one specific project only is called a consortium. It is a temporary alliance of a few companies to perform a contract or to construct a project. Forming a joint venture is a good way for companies to partner without having to merge.

A joint stock company - public or private - is a business entity owned by shareholders. Each shareholder has the portion of the company in proportion to his or her ownership of the company's shares. A private joint stock company is not listed at the Stock Exchange and is not entitled to have public offerings of its stock. It distributes the shares among the founders or participators and has no right to raise capital from selling equities. On the contrary, a public joint stock company is listed at the Stock Exchange. It has public offerings of its stock to raise capital for the company’s development. In modern corporate law, a joint stock company is a forerunner of the modern corporation.

A corporation is a legal entity that is separate and distinct from its owners. A corporation is chartered by the state in which it has headquarters and is monitored by federal, state and local agencies. It has the right to enter into contracts, loan and borrow money, sue and be sued, hire employees, own assets and pay taxes. The owners of the corporation are its shareholders. They elect aboard of directorsto oversee the main policies and decisions. A corporation has a life of its own and does not dissolve when ownership changes. In a corporation withlimited liabilityshareholders are accountable only for their investment in stock of the company, while the officers are held liable for the failure to withhold and pay employment taxes. A corporation with limited liabilityunites a few firms or companies and its main source of capital is public offering of shares or the sales of other securities. As for the closed corporation,it is closed to investment from the general public, shares are held by the owners of the corporation and their families, so when a shareholder dies or wants to liquidate the position, the business will buy back his share.



The ways of raising capital are different under different forms of business organisation. A major difference among organisational forms is the degree to which owners are personally liable for debts of the business. Thus, if a proprietorship fails, creditors can claim the owner’s property to pay off the debts of the business, while a corporation will not dissolve if its ownership changes.

Answer the questions:

1. What legal forms of business organisation can you name?

2. What is a sole proprietorship?

3. What are the main forms of a proprietorship?

4. Why are joint ventures set up??

5. What is a consortium?

6. What types of joint stock companies do you know?

7. How does a public joint stock companyraise capital?

8. How does a corporation differ from other forms of business organisation?

9. What a closed corporation?

10. What is the major difference among organisational forms?

 





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