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FORMS of OWNERSHIP - NOTES

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FORMS of OWNERSHIP - NOTES

Uploaded by

nicksonogugu8
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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I

FORMS OF OWNERSHIP

Forms of ownership refer to the different ways in which assets, property, or businesses can be
legally owned and operated. The choice of ownership structure can have significant implications
for liability, taxation, management control, and the ability to raise capital.

The common forms of ownership include:


(a) Sole Proprietorship: This is where a single individual owns and operates the business.
The owner has complete control, and the business and personal finances are not separate.
However, the owner is personally liable for all debts and obligations of the business.
(b) Partnership: A partnership involves two or more individuals (partners) who objectively
come together to run a business. The partners share profits, losses, and responsibilities
according to the terms outlined in a partnership agreement. There are different types of
partnerships, including general partnerships (where all partners have unlimited liability)
and limited partnerships (where some partners have limited liability).

Limited liability is a legal concept that protects the personal assets of owners or share-
holders of certain business entities in the event of financial losses, debts, or legal liabilities
incurred by the business.i.e.,it limits the extent of financial risk to the amount invested in
the business, shielding personal assets from being used to satisfy business debts or obliga-
tions.
(c) Corporation: A corporation is a separate legal entity from its owners (shareholders). It can
own property, enter into contracts, and conduct business in its own name. Shareholders have
limited liability for the company’s debts, and their personal assets are generally protected.
Corporations are often subject to more complex regulations and taxation.
(d) Limited Liability Company (LLC): A LLC combines elements of both a corporation and
a partnership. It offers limited liability protection for its owners (called members) while
maintaining flexibility in management and taxation. LLCs have become a popular choice
for small businesses due to their advantages in liability protection and taxation.
(e) Cooperative: A cooperative is an organization owned and operated by its members, who
may be customers, employees, or producers. Cooperatives are designed to serve the common
needs and interests of their members, and profits are typically shared among the members.
(f ) Joint Venture: A joint venture involves two or more parties coming together for a specific
project or business venture. Each party contributes resources, expertise, or capital, and
they share in the risks and rewards of the venture.
(g) Franchise: Franchises involve a business owner (franchiser) granting another party (fran-
chisee) the right to use their business model, brand, and support in exchange for fees and
royalties. Franchisees maintain some level of independence while benefiting from an estab-
lished brand and business system.
(h) Trust: A trust is a legal arrangement where a trustee holds and manages assets on behalf
of beneficiaries. Trusts are often used for estate planning, asset protection, or charitable
purposes.

STARTING AND REGISTERING A SMALL FIRM


A a "firm" refers to a company, enterprise, or organization engaged in commercial, industrial,
or professional activities to provide goods or services. It could be a small business, a large
corporation, a partnership, or any other legal entity that operates to conduct business.

Starting and registering a small firm can be an exciting undertaking which formally involves
several steps and considerations.

The basic steps include:

(a) Idea and Business Plan


Identify a business idea that aligns with your skills, passion, and market demand. Create a
detailed business plan outlining your goals, target market, competition analysis, marketing
strategy, financial projections, and an operational plan.
(b) Choose a Business Structure(Form of Ownership)
Select a legal structure for your firm. Common options include sole proprietorship, part-
nership, limited liability company (LLC), and corporation. Each structure has its own
implications for liability, taxes, and management, so research which one suits your needs
best.
(c) Select a Business Name
Choose a unique and memorable name for your firm that is not already in use and that
complies with local naming regulations.
(d) Register Your Business
Register your business with the appropriate government authorities in your country or
county. This step formalizes your business and makes it a legal entity.
(e) Obtain Necessary Permits and Licenses
Depending on your business type and location, you may need specific permits or licenses
to operate legally. Research and obtain the required licenses from the relevant authorities.
(f ) Set Up The Business Bank Account
Open a separate business bank account to keep your personal and business finances separate.
This will help with accounting and tax filing.
(g) Set Up Bookkeeping and Accounting
Implement a reliable bookkeeping system to track your business finances. Consider using
accounting software or hiring an accountant to manage your financial records.
(h) Secure Funding
Determine the startup costs and financial requirements for your firm. Explore funding
options such as personal savings, loans, grants, or investors.
(i) Develop a Marketing Strategy
Create a marketing plan to promote your firm and attract customers. Utilize both online
and offline marketing channels to reach your target audience effectively.
(j) Hire Employees (If Needed)
If your business requires employees, define job roles, and start the hiring process while
observing compliance with labor laws and regulations.
(k) Insurance
Consider getting business insurance to protect your firm from unforeseen risks and liabilities.
(l) Comply with Tax Requirements
Understand your tax obligations and register for the necessary tax identification categories.
Keep track of your tax deadlines and payments.
(m) Establish a Web Presence
In today’s digital age, having a website and a strong online presence has become an essential.
Create a professional website and leverage social media to connect with potential customers.
(n) Operate and Grow
Once your firm is set up, focus on delivering quality products or services to your customers.
Continuously monitor your business performance, gather customer feedback, and adapt
your strategies to grow and succeed.

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