Completes the statement or answer the question.
1. One advantage of the sole proprietorship form of business organization is that
a. it is easy to raise capital
b. it has unlimited liability
c. there is limited life of the business
d. there is no sharing of profit
2. The legal form of business organization that has only one owner is known as
a. a sole proprietorship
b. a partnership
c. a cooperative
d. a limited company
3. A sole proprietorship is also referred to as _______________
a. single proprietorship,
b. individual proprietorship,
c. individual enterprise
d. all of the above
4. The only legal requirements for starting one-man business is __________________
a. an Agreement of Partnership
b. a Charter
c. municipal and registration licenses
d. oral permission from local authorities
5. One advantage of corporate form of business organization is that
a. the number of government regulations is small
b. there is unlimited liability
c. there is easy transfer of ownership
d. taxes are low
6. One advantage of the corporate form of business ownership is that
a. it has limited liability c. it requires sharing of ownership
b. in has unlimited existence d. it must comply with a number of government regulations
7. A corporation that sells shares to the public is known as a
a. private corporation c. nonprofit corporation
b. government corporation d. public corporation
8. A law firm might easily be organized as a
a. partnership
b. sole proprietorship
c. cooperative
d. private corporation
9. Two partners operating a small amusement park with high-risk rides should consider changing
their current partnership to a
a. sole proprietorship
b. limited partnership
c. private corporation
d. cooperative
10. The most common form of business organization for a small business is
a. the corporation
b. the cooperative
c. the sole proprietorship
d. the partnership
DISCUSSION
1. Give your reasons that ease of discontinuance is an advantage of the proprietorship form of
legal organization.
2. Is the owner of a small corporation as free to make all decisions as a single proprietor?
Explain.
CASE STUDY
F inding A P artner
Five years ago, Nick Page set up his own business, making hand-made furniture. It was a hard struggle at first; but for the last year he has bad so many orders that he cannot cope with them.
Six months ago, Nick obtained an £8,000 bank loan to buy some modern machines. Although the machines helped him to produce more furniture, the number of orders continued to rise, so that he still could not keep up with them.
Nick decided that the only solution was to take on a partner who would be able to share the work and invest some money in the business to pay off part of the bank loan. He put the following advertisement in the local newspaper.
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| WORKING PARTNER required for hand-made furniture business. Experience and capital needed. Send full details Box 6249 |
Tree days later he received a reply.
| Seaview Rambold Westshine Dear Sir, I was very interested in your advertisement in the Westshine Gazette for a partner in your furniture business. For twelve years I run my own hand-made furniture business in East Anglia, but I had to give it up. I am now working in a furniture factory in Ambleside, where I have been unemployed for two years. I could show you some photographs of the furniture I made when I had my own business, or you are very welcome to inspect the examples I have in my home. It would be possible for me to invest small amount of money in your business. If you are interested, I would come to see you. Yours faithfully, John Reed |
The Meeting
Nick asks John Reed to come to the workshop. John is 20 years older than Nick, but they get on well together from the start.
John's photographs of his furniture show that he is a very skilled worker. He is also full of ideas about new kinds of furniture they could produce.
During their long talk, John reveals why he had to give up working for himself. A solicitor had cheated him out of thousands of pounds profit from his business.
Nick is very keen to have John as a partner. However, when they discuss the terms of the partnership, they run into problems.
John says he is willing to invest £3,000; but he wants 50 per cent of the profits because he has had much more experience. John also says that he is not very keen to have a deed of; partnership drawn up by a solicitor, because of his bad experience with the solicitor in the past.
ACTIVITIES
Questions 1. What are the three most important points that should be included in a
partnership agreement?
2. What actions would you advise Nick to take?
Role play Find a partner. One person takes the role of Nick; the other the role of John.
Nick should try to persuade John to change his conditions for the partnership.
