Question

Answer the following:

1. If you were to start a business, which ownership form would you choose? What factors might affect your choice?

2. Why might an investor choose to become a partner in a limited partnership instead of purchasing the stock of an open corporation?

3. Discuss the following statement: “Corporations are not really run by their owners.”

4. What kinds of services do not-for-profit corporations provide? Would a career in a not-for-profit corporation appeal to you?

5. Is growth a good thing for all firms? How does management know when a firm is ready to grow?

Answer 1

Hi,

1. If you were to start a business, which ownership form would you choose? What factors might affect your choice?

The various forms of ownership options available, it can be sole proprietary; it can be partnership, limited liability partnership, corporate. For deciding which ownership structure fits to the requirement, one should understand the following factors:

• The potential risks and liabilities involved
• The formalities and expenses involved in establishing and maintaining the business structures
• Income tax situation
• Investment needs

If I was asked to choose the ownership structure, I would probably choose a limited partnership. An LLC is where the members within the company are not held personally liable for the company’s debts or liabilities and their risk exposure is limited to the extent of their capital. It provides great advantage in the way that partners have much tighter power and control. An LLC keeps the tax side of the business easier as allowing the individuals to be self-proprietors.

2. Why might an investor choose to become a partner in a limited partnership instead of purchasing the stock of an open corporation?

An investor might choose to become a partner in a limited partnership instead of purchasing the stock of an open corporation because a limited partner has no management responsibility and liability is also limited to the extent of their capital. Also tax benefit , control over business structure and flexibility prevails with reduced compliance that help partner of limited liability a better option than to purchase stock of open corporation.

3. Discuss the following statement: “Corporations are not really run by their owners.”

The validity of the statement depends on the size of the corporation in question. It also depends to some extent on the ownership structure. In general, the larger the corporation is, the less likely its owners are truly running it. This is because it is impossible to actually be involved for day to day activity of a huge business. For running the business, owners appoint directors and management, who actually work and make business run on daily basis. Thus, Corporation can act only through its directors who are appointed by the stockholders of the corporation and run the business.

4. What kind of services do not-for-profit corporations provide? Would a career in a not-for-profit corporation appeal to you?

A not-for-profit corporation is a corporation organized to provide a social, educational, religious or other service rather than to earn a profit". The main goal of a non-profit is to "improve communities and change lives, dealing with issued prevails in society". A not-for-profit means that profits are not returned to owners and/or investors, however employees are still paid.

I would consider working at a not-for-profit organization if I believed in their mission. I believe along with monetary gains there will be psychological satisfaction of giving something back to the society and hencee the option seems appealing to me.

Hope this answer seeems satisfactory to you.

Regards