Forms of Business Organization

A business may be privately owned in three different forms. These forms are: the sole proprietorship, the partnership and the corporation.

The sole proprietorship is the simplest organizational form. There is one ownerwho makes decisions without consulting anyone. Most private businesses are sole proprietorships. First of all, they are service industries, such as beauty shops, different repair shops, restaurants. But they account for only small part of all business receipts.

A partnership is an association of two or more partners to carry on business for profit. When the owners of the partnership have unlimited liability they are called general partners. If partners have limited liability they are limited partners. There may be a silent partner – a person who is known to the public as a member of the firm but without authority in the management, and a secret partner – a person who takes part in management but who is not known to the public. The advantages of this form are obvious: it can provide a big capital, diversifiedmanagement, tax benefits from the government. Partnerships have certain disadvantages, too. One is unlimited liability. Other disadvantages are division of profits, disagreements between the partners and difficulty on terminating the business.

A business corporation is an institution established for the purpose of making profit. It is operated by individuals. Their shares of ownership are represented by stock certificates. A person who owns a stock certificate is called a stock-holder. The advantages of this form are the following: 1) the ability to attract financial capital; 2) the possibility to invest the capital in plants, equipment and research, 3) the possibility to offer higher salaries and attract talented managers and specialists.

It is obvious that there are some disadvantages to incorporating. Here are a few of them: 1) initial cost and paperwork as incorporating involves expensive lawyers and detailed accounting records; 2) double taxation as incorporate income is taxed twice, first as corporation’s income and then as shareholders’ income; 3) size as large corporations sometimes cannot respond quickly to market changes.

Except privately owned business corporations there are some other types too. Educational, religious, charitable institutions are also incorporated. There may be governmental corporations. Such corporations do not issue stock and are nonprofit.

Exercise 3. Answer the following questions:

1. What forms of ownership do you know?

2. Why is the sole proprietorship the simplest organization form?

3. What are partnerships organized for?

4. What kinds of partners do you know? State the difference between them.

5. What are the advantages and disadvantages of a partnership?

6. What institution is a business corporation?

7. What are the advantages of a corporation?

8. Can you name any disadvantages of a corporation?

9. What corporations do not issue stock?

Exercise 4. Translate into English.

Найпростіша організаційна форма; не радячись ні з ким; перш за все; ремонтна майстерня; об’єднання; людина, що відома громадськості; розгалужене керівництво; втрачати зацікавленість; заклад, утворений з метою; окрема особа; здатність залучати капітали/ спеціалістів; наукове дослідження; благодійний заклад; безприбутковий.

Exercise 5. Translate into Ukrainian.

Sole proprietorship; to make decision; beauty shop; business receipt; to carry on business; the advantages are obvious; unfortunately; to disagree with each other; a share of ownership; to be represented by a stock certificate; to invest the capital; to offer a higher salary; except; to be nonprofit.

Exercise 6. Match and learn the synonyms.

A: owner, benefit, shareholder, person, receipt, obvious;

B: advantage, income, clear, proprietor, stock-holder, individual.

Exercise 7. Match and learn the opposites.

A:advantage, agree, obvious, private, limited, profit;

B: unlimited, nonprofit, secret, disagree, disadvantage, public.

Exercise 8. Complete the sentences with the proper words from the list below:

fail; proprietor; tax benefit; advantages; limited; general

1. If you establish a partnership you can get … from the government.

2. The possibility to attract big capital is one of the … of a corporation.

3. A sole … can make decisions himself. 4. … partners have unlimited liability for their business. 5. Your business may … if you lose interest in it. 6. The letters Ltd stand for … partnership.

Exercise 9. On the basis of the text define the following terms:

general partner; limited partner; secret partner; silent partner.

Exercise 10. Group the terms given in ex.9 a) on the basis of liability and explain the difference; b) on the basis of authority and explain the difference.

Exercise 11. Characterize the advantages and the disadvantages of each form of ownership.

	advantages	disadvantages
Sole proprietorship
Partnership
Corporation

Exercise 12. Translate into English.

1. Одноосібний власник несе необмежену відповідальність за свій бізнес. 2. Цей ресторан дає велику частку прибутків нашої фірми.

3. У Великій Британії партнерством називають об’єднання від 2 до 20 осіб. 4. Наш таємний партнер може забезпечити фінансовий капітал. 5. Які ваші повноваження у керівництві фірми? 6. Компанія має можливість інвестувати капітал в нове обладнання. 7. В чому перевага партнерства з обмеженою відповідальністю? 8. Корпорації закладів освіти є неприбутковими.

Grammar point:* Passive constructions with modal verbs.

The Present Continuous Tense: Active and Passive forms (p.137-138)

*The structure to be going (to do something).