 In this introductory video for Unit 9 dealing with forms of business ownership, we'll introduce you to the various forms of business we find today in the United States. I want you to think for a moment about the various kinds of business you are familiar with. They could range from small shops, professional firms, all the way up to large multinational companies. In this unit we're going to take a look at various forms of business organization. You'll find there are many types of business organization that may be chosen. They can be broken down essentially into three major categories. Again, these are broad categories and there's a lot of variation within them. First being sole proprietorships, second being the partnership, third being the corporate form of ownership, the corporate form. So let's start by taking a look at sole proprietorships. Sole proprietorships are the most basic form of business organization. Basically one person and that person and the company are one. That person and the business are one. Let's take a look at some of the advantages of a sole proprietorship. No or few formalities. The owner is in complete control, single owner in complete control. But of course they also come with disadvantages including unlimited viability. In essence the owner is responsible for all debts. The owner is responsible for any suits against the company or the business. It can be difficult to raise money with a sole proprietorship. It's difficult to raise money. So let's take a look at the next form of business we've talked about so far. The partnership. The partnership. Okay, a partnership is a business owned by two or more individuals and the one we are most familiar with probably is what's known as the general partnership. The most basic form of partnership is the general partnership. In essence each partner is a proprietor of the business, just not the sole proprietor. Partners share in the management of the business. Again let's take a look at some of the advantages and disadvantages. Businesses of partnership include each partnership, each partner has the right to share in profits. Each partner has the right to share in profits. It's pretty easy to form, usually in most jurisdiction. And partners again have authority, complete authority and they can run the business as they see fit. Now of course again there are disadvantages and among the greatest disadvantages, very similar to the sole proprietorship, unlimited liability for each member, for each partner of the partnership. So again a distinct disadvantage because partners can be sued, they incur debts and they will be responsible for those debts personally. There's a newer form in the last 20 to 30 years of partnership known as a limited partnership as opposed to a general partnership, a limited partnership. And this is composed of business consisting of one or more general partners as in our general partnership and one or more limited partners, more limited partners. Some of the advantages of this are that it's easy to raise money and you'll see why, you'll see why when you consider that limited partners have limited liability. So a person who wishes to invest in a limited partnership can join as a limited partner and they won't have the types of liabilities that you see in a general partnership. They're going to be limited in their liability, they cannot be personally held personally liable for the debts of the company. So it's a great advantage, of course once again we have disadvantages and primarily the disadvantage is that the limited partner only has limited control, in fact they cannot participate in the day to day management of the partnership. That's up to the general partner. The general partner is going to have unlimited liability as in a general partnership. So again the attraction here is that you can bring in limited partners who are willing to invest their money because their personal assets aren't on the line. Let's take a look now at the third form which many people are familiar with, especially when we speak of multinationals, corporations and variations on this theme throughout the world. So unlike sole proprietorships and partnerships, corporations have a complete, separate legal identity, a complete, separate legal identity. Owners own shares of stock organized under articles of incorporation, articles of incorporation. Management is in the hand of a board of directors, an elected board of directors, elected by shareholders and they appoint the management of the corporation. Board of directors appoints the management of the corporation, we have day to day operations. So again let's take a look at the advantages and disadvantages of the corporation. Like limited partners, owners of shares of stock in a corporation have limited liability, so they can't be held personally liable for the debts and obligations of the corporation. As a result it is much easier to raise money, much easier to raise money in a corporation. What about the disadvantages? There's some notable disadvantages to a corporation. In the United States they pay a separate income tax, so whereas the partner or the sole proprietor is not going to pay a separate income tax but that would be part of that person's personal income tax. Owners of shares in a corporation pay income tax and so does the corporation as a separate legal entity. Another disadvantage is that it's not as easy to form. Particularly with regard to the expenses involved in formation and maintaining the company. There's one more entity that I'd like to talk about that is a hybrid of the other three. A fairly recent development in itself, the limited liability company. The limited liability company also known as the LLC. It's a hybrid really of sole proprietorship, partnership and corporation. One of the distinct advantages of a limited liability company is that any or all owners can run the company. Any and all owners can run the LLC. Also, the owners have limited liability, thus the name. They're protected against having personal liability for the debts and obligations of the company. And they're pretty easy to form depending on the jurisdiction. Distinct disadvantages are included however. Most notable being that it's more difficult to raise funds. So in choosing a business organization you need to look at several factors. Several factors have to be weighed including how much control do you want as a business person? How big a concern is liability for debts and obligations? Will you be looking to raise money? If you're looking to raise money to expand, that's going to direct some of your choices. How much are you willing to pay in taxes? So in this introduction to Unit 9, we provided an overview of the various forms of business organization including the sole proprietorship, sole proprietorship, the partnership, corporation and the hybrid off here, the limited liability company. So the issues touched on in this introduction are going to be fleshed out in this unit.