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3-4 Forms of Business Ownership [CH 3

mind: working in eco-friendly environmental design or making robotic lawnmowers.
Both of these entrepreneurs had to learn to budget and track their income and
expenses as they grew their business. Because they are managing people, meeting

customers while still pursuing their studies, which began in their high school and
continues at university, they developed their time management skills because of the
demands on their time.

General Thoughts

In organizing any economic endeavor, the following procedures should be
considered: (1) recognizing an economic need, (2) conducting and analyzing a
marketing survey to determine product need, and (3) selecting the most desirable legal
structure (organizational form).

If it is business ownership at all cost, then what form of business should you start
with? Determining the legal form of business ownership when starting a business can
be a complex and critical decision. For certain there is information one needs to know
about business structures, their advantages and disadvantages. Every business, whether

a John Deere Inc., egg ranch, or the neighborhood taco stand, must choose a form of
business ownership that best meet its needs.
Various factors are considered when choosing a form of business ownership. Some
of the variables include ease of formation, financial liability, availability of financial

resources, the ability to raise capital, taxation, technical expertise, management skills,
and the interests of those involved.
There are three fundamental forms of business and they are: sole proprietorship,
partnerships and corporations. All other forms are variations on those three. In this

chapter you will explore their advantages and disadvantages and discuss alternative
forms of public and cooperative ownership.

Starting a Business

Every day in the United States someone is opening a new business for the first
time. Restaurants, e-businesses, nonprofit organizations, farms and ranches, and shops.
Someone with a dream is behind all of this activity and it does not confine itself to age,
gender or ethnicity. The dream of opening and owning your own business is a common
one.

For a few of these individuals, that dream awakens into another tremendous success
story. There are not guarantees for success. In fact, most new businesses close their
doors unceremoniously having failed. Not everyone is cut out to be an entrepreneur.

After all, it is a learned trait. However, hope upon hope always rises, for as it is, the
successful entrepreneur when first starting out fails, on average, in four attempts before
getting that first success—and over time they learn a lot.
When starting a business, examine and consider the following factors:

1. Capital requirements: This is the amount of money and resources that will be
needed to finance and operate your business.
2. Risk: The amount of personal property you are willing to lose when starting a
business.
3. Control: The amount of authority you want to exercise as an owner.

4. Managerial abilities: What skills are needed to plan, organize and control the
business?
5. Time requirements: The time needed to operate the business and supervise the
employees.
6. Tax Liability: What are the tax obligations associated with running a business,
and which government agencies will be interfering with your business?

Each of these points need to be considered along with your own personal values,
your work ethic, your integrity and desire to succeed. Many entrepreneurs prefer to
work for someone else while they learn the ropes of a particular business or industry.
They use this as a training ground. Others will jump right in and learn as they go.

Readers are Leaders, Leaders are Readers, non-readers follow!
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