Forms of business organization. Businesses can be organized in the variety of ways

Businesses can be organized in the variety of ways. The three most common types are sole proprietorships, partnerships and corporations.

The simplest way to organize the business alone is to form a sole proprietorship. An individual raises some money, finds the location from which to operate, and starts selling a product or service. He makes decisions, hires and fires, controls the profits and losses himself. It allows putting policies to effect quickly. But a sole proprietor also has a risk – unlimited liability for matters relating to business. It means that he is responsible for all the obligations and debts of his business. So if the business fails the sole proprietor will have to declare personal bankruptcy. Although unlimited liability is a major disadvantage of a proprietorship, liability insurance is often available to reduce the risk of losing business and non-business assets.

Two or more people may join together to form a partnership to carry on the business for profit. They can do it on an informal basis without a written partnership agreement, or on the contract basis. This contract describes all the rights and obligations of each partner, the amount of the invested money, the allocation of future profits and losses, the duties in the company and other matters. It is called articles of partnership. If you have no money to invest, you may contribute your services, skills, knowledge, sometimes just your name or reputation. Each partner is liable for the activities of the partnership as a whole, and is responsible for all the partnership’s debts. There are different classes of partners: general – active participants in the management of the business, who have unlimited liability; limited partners – who are liable only for the amount they invested into business; secret partners – who are not known to the public but have the right to make decisions and to vote; and silent partners – who are known to the public but without authority in management. All the partners should pay taxes, but the partnership itself is not taxed because the income merely passes through partnerships to the partners.

The third form of business organization is the corporation. Corporations are legal entities separate from their owners. To establish the corporation the owners must apply for the corporate charter. Having received the charter they hold a meeting, elect the board of directors, adopt bylaws, and specify the governing rules in a contract form which is called the articles of incorporation. Corporations are taxed as separate legal entities; it means they must pay taxes as if they were individuals. Stockholders, the corporation owners, have limited liability for the corporation’s activities. They cannot lose more than the amount of the stock. This makes the corporate form of organization very attractive for the owners. The corporations have certain benefits. As they exist separate from the owner, they can “live” beyond the death of the original owners. Another benefit is that corporations have a professional management team and board of directors, which looks out for the interests of the owners and represents them. Actually the stockholders (owners) do not take an active role in management.

Exercise 7. Read the text once again and find key words in every passage.

Exercise 8. Read every passage once again and express its contents in one sentence.

Exercise 9. Translate the sentences into English. Review grammar in §2, §3 of grammar supplementary:

1. Тебе следует принимать решения самому.

2. На твоем месте, я бы стал секретным партнером.

3. Мы должны быть ответственны за все обязательства и долги партнерства.

4. Думаю, он сможет быстро достичь хороших результатов.

5. Что ты можешь рассказать о классах партнеров?

6. Если они хотят основать корпорацию, они должны будут подать заявление на корпоративный патент.

7. На прошлой неделе мы должны были избрать новый совет директоров.

8. Один из недостатков частной собственности заключается в том, что тебе следует нести неограниченную юридическую ответственность.

9. Где ты можешь взять деньги, чтобы основать бизнес?

10. Акционеры могут не принимать активного участия в управлении компанией.

Exercise 10. Look through the characteristics of business ownerships forms and make the presentation “If I wanted to establish business, it would be…” Give your reasons.