10/11/16

FACULTY OF ECONOMICS AND BUSINESS

UDAYANA UNIVERSITY

Agoes G. Rahyuda, Ph.D.

BUSINESS OWNERSHIP
Introduction to Business – Week 5

AG Rahyuda

Core Teaching Topics

BUSINESS TRENDS
1.  Taking Risks and Making Profits
2.  Economics and Business BUSINESS MANAGEMENT
3.  Business in Global Markets
5.  Business Ownership
4.  Ethical and Socially Responsible Business
6.  Management and Leadership
7.  Structuring Organizations

BUSINESS FUNCTIONS
8.  Production and Operations Management
9.  Motivating Employees
10.  Human Resource Management
11.  Marketing: Developing and Pricing Goods and Services
12.  Distributing Products and Using Effective Promotions
13.  Understanding Accounting and Financial Information
14.  Financial Management

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Topic 5: Business Ownership

1)  Sole Proprietorships

2)  Partnerships

3)  Corpora7ons

4)  Other Types

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1) Sole Proprietorships
Sole Trader_
•  A business that is owned (and usually operated) by
one person
o  The simplest form and the easiest to start
o  Usually the business is small in size
o  Most common in retailing, service, and agriculture

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1) Sole Proprietorships
ADVANTAGES_
1.  Easy to start-up and closure
•  No contracts, agreements, or advance legal documents
o  Registering the name of the business
o  Obtaining licenses or permits
•  Not success? close whenever you want without going
through any legal procedure
o  But first, pay your debt

2.  Pride of ownership

•  Solving day-to-day problems
•  Business fails? you to blame
3.  RetenGon of all profits
•  Strong mo7va7on to succeed because all profits become
the personal earnings of the owner

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1) Sole Proprietorships
ADVANTAGES_
4.  No special taxes
•  Taxed as the personal income of the owner
o  Repor7ng certain financial informa7on for the business on
their personal income tax returns
o  Making tax payments to the government
•  Do not pay the special government taxes that
corpora7ons pay
5.  Flexibility
•  Free to make any decisions about the firm’s
opera7ons
o  Switch focus from retailing to wholesaling
o  Move a shop’s loca7on
o  Open a new store or close an old one

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1) Sole Proprietorships
DISADVANTAGES_
1.  Unlimited liability
•  A legal concept that holds a business owner personally
responsible for all the debts of the business
•  Business fails? owner’s personal property (savings and other
assets) can be seized or sold to pay creditors
2.  Lack of conGnuity
•  Problems such as re7rement, die, legally incompetent, ill, or
cannot work for an extended period of 7me of the owner will
determine if the business might con7nue or perish
3.  Lack of money
•  Limited amounts of capital that can prevent them from
growing
•  No clear business plan? no Big money will come to you
•  Bank will s7ll be worry:
o  Limited assets to use as collateral
o  Worry about con7nuity

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1) Sole Proprietorships
DISADVANTAGES_
4.  Limited management skills
•  An individual is unlikely to have exper7se in all
the management areas (producing, resourcing,
managing finance and human resource,
marke7ng)
5.  Difficulty in hiring employees
•  Employees will think that there is no room for
career advancement or decision-making
involvement
•  Employees who are trained and ready to take on
added responsibility may find it is easier to use
their skills on other larger firms or start up their
own businesses

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2) Partnerships

“A voluntary associaAon of two or

more persons to act as co-owners
of a business for profit”

{Complementary Partnership}

{Limited Partnership}

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2) Partnerships

A business co-owned by two or more

general partners who are liable for
everything the business does

A person who assumes full or shared

responsibility for operaAng a business

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2) Partnerships

a business co-owned by one or more

general partners who manage the
business and limited partners who
invest money in it

A person who invests money in a business but who has

no management responsibility or liability for losses
beyond his or her investment in the partnership

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2) Partnerships
ADVANTAGES_
1.  Ease of start-up
•  Basic form of contract or agreements
o  Registering the name of the business
o  Obtaining licenses or permits

2.  Availability of capital and credit

•  Pooling funds from both par7es
o  Banks are more confident to provide more credit or larger loans to
a partnership than to a sole proprietor. the concern will be in the
possibility of management disagreements and lack of con7nuity

3.  Personal interest

•  Pride of ownership
o  Very concerned with the opera7on of the firm

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2) Partnerships
ADVANTAGES_
4.  Combined business skills and knowledge
•  Complementary skills
•  Discuss important decisions together relieves some
pressure and leads to more effec7ve decision making

5.  RetenGon of profits

•  Profits are shared accordingly so each is mo7vated to
do the best to make the firm succeed

6.  No special taxes

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2) Partnerships
DISADVANTAGES_
1.  Unlimited liability
•  Each partner is legally and personally responsible for the
debts, taxes, and ac7ons of any other partner conduc7ng
partnership business, even if that partner do anything
wrong
2.  Management disagreements
•  Want to bring an outsider into the business? withdraw
more money from the business?
o  Egos, ambi7ons, and money are the antecedents of fric7on

3.  Lack of conGnuity

4.  Frozen investment
•  Classical problem: easy to invest, difficult to get it out

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3) CorporaGons

An ar+ficial person, invisible, intangible, and

exisAng only in contemplaAon of the law
o  Right to start and operate a business
o  Right to buy or sell property
o  Right to borrow money
o  Right to sue or be sued
o  Right to enter into binding contracts

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3) CorporaGons

Stock

Common • Open corpora7on

• Closed corpora7on

Structure Loca7on

Preferred •  Stockholders’ rights:

q  Dividend
q  Proxy

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3) CorporaGons
ADVANTAGES_
1.  Limited Liability: A feature of corporate
ownership that limits each owner’s financial
liability to the amount of money that he or she
has paid for the corporaAon’s stock
2.  Ease of raising capital
3.  Ease of transfer of ownership
4.  Perpetual (never ending) life: a corporaAon
exists independently of its owners and survives
them
5.  Specialized management

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3) CorporaGons

DISADVANTAGES_
1.  Difficulty and expense of formaGon
2.  Government regulaGon and increased
paper-work
3.  Conflict within the corporaGon
4.  Double taxaGon
5.  Lack of secrecy

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4) Other Types
a)  S-CorporaGons
o  A corporaAon that is taxed as though it were a partnership
q  Max. 100 stockholders
q  Stockholders must be individuals, estates, or certain trusts
q  Must be a domes7c corpora7on eligible
q  No partnerships, corpora7ons or nonresident-alien
stockholders
b)  Limited-Liability Companies
o  A form of business ownership that combines the benefits of a
corporaAon and a partnership while avoiding some of the
restricAons and disadvantages of those forms of ownership
c)  Not-for-profit CorporaGons
o  A corporaAon organized to provide a social, educaAonal,
religious, or other service rather than to earn a profit

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4) Other Types

d)  CooperaGves
o  An associaAon of individuals or firms whose purpose is
to perform some business funcAon for its members

e)  Joint Ventures

o  An agreement between two or more groups to form a
business enAty in order to achieve a specific goal or to
operate for a specific period of Ame

f)  Syndicates
o  A temporary associaAon of individuals or firms
organized to perform a specific task that requires a
large amount of capital

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Topic 5: Business Ownership

1)  Sole Proprietorships

2)  Partnerships

3)  Corpora7ons

4)  Other Types

AG Rahyuda

Next Week Assignments

¨  Group Presentation
Please read Nickels’ (2016) case study on page 148
and answer the provided questions

¤  20mins presentation + 20mins discussion

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Individual Assignments
ü  Paper:
¤  Font: Times New Roman, 12pt;

¤  Margin: 2.5 all;

¤  Space within paragraph: 1.15;

¤  Space between paragraph: 6;

¤  Binded

AG Rahyuda

Core Teaching Topics

BUSINESS TRENDS
1.  Taking Risks and Making Profits
2.  Economics and Business BUSINESS MANAGEMENT
3.  Business in Global Markets
5.  Business Ownership
4.  Ethical and Socially Responsible Business
6.  Management and Leadership
7.  Structuring Organizations

BUSINESS FUNCTIONS
8.  Production and Operations Management
9.  Motivating Employees
10.  Human Resource Management
11.  Marketing: Developing and Pricing Goods and Services
12.  Distributing Products and Using Effective Promotions
13.  Understanding Accounting and Financial Information
14.  Financial Management

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