Forms Of Ownership

Form of Ownership in business refers to the legal structure, Management, and classification of business .Forms of Ownership in the company are very crucial in determining the productivity, Management, and the company relating to the outside; it determines how funds are raised, the legal obligation, entity and the size of firms. 

Through many years as human revolves, so does business; the form of business ownership since the settlement of man on earth has always been entrepreneurship, woman and man alike hawking their goods, paddling moving resources from one place to another but in recent years and coming to the age of industrial revolution all over the country there has been a huge development in business which also affect the Ownership and acquisitions of business. Nowadays, we have different forms of Ownership in the company, which we will explore.

Forms of Ownership in Business

1. Entrepreneurship

Generally known as a one-person business, entrepreneurship is a form of company controlled, managed, and financed by a person. In entrepreneurship, the owner is a single businessman, or the woman is the overseer, director, and manager of his company or business; he may have other people working under them as employees.

In this kind of Ownership, the individual bears the weight of the business; he sought out funds, he takes the legal implications arising from the company because the individual is not separated from the industry in terms of a legal entity, and he makes decisions alone without the consent of any partner for the interest of their business, it is most practiced business ownership in the World.

Entrepreneurship comes with many advantages regarding another aspect of Ownership, the advantages enjoyed in entrepreneurship include being very easy to set up, Inexpensive, and Quick decision-making, but despite these advantages and benefits enjoyed by entrepreneurs, certain disadvantages apply to it, including.

1. The business dies with owners; None of us has escaped death, and none will be in the future; this is a nature that will happen to each of us. In case of death, the business dies with the owner since the company is not on its own.

2. Limited Funds; When resources are pulled together, it makes wealth, but in terms of entrepreneurship, this does not happen as the individual bears the sourcing of the funds; these can not be compared to other forms of Ownership in terms of gathering funds 

3. Legal Obligation; in case of any legal issue associated with the owner, the business might go down with the individual since it is not separate from the owner.

There are a lot of advantages and disadvantages associated with entrepreneurship, but this is one of the most practiced forms of Ownership in the World.

2. Partnership 

This form of Ownership is when 2 to 20 individuals control or own a business. They are partners who come together to control and manage a business, and agreements bind them; they agree to share the profit and loss based on the understanding and allocation of each partner; in partnership, the partners may be friends who come together to establish a stronger entity, or they may be a business partner.

In partnership, not all partners contribute money to the business, and not all are actively engaged in the day-to-day operation of the company; we have a general partner who oversees the day-to-day of the business, some contribute finances, but they might not be active in the industry while some only contribute names.

They are various benefits associated with the partnership. They include it is easier to raise funds than in a partnership, Shared management duties, and pooled expertise in terms of knowledge and profession; regardless, they are limitations attached to the league, including Unlimited Liability, which means that you are not limited to a certain liability in case the business went bankruptcy or fail you might lose more than what you contributed, Disagreement may happen as a result of profit split and the company might fail in case of uncertainty like the death of one of the partners.

3. Corporation

This form of Ownership separates the owner from the business; the business operates as a legal entity which means it can sue and be sued. They sell stocks to the public to acquire part of the Ownership of the company, and they have limited Liability, which means the stockholder is only limited to its acquisition or a particular number of shares; the rules are more complex and more regulated. 

Corporation Shares the same structure and operation as Limited Liability Company, but they are different in terms of tax; corporations are taxed as a separate entity, and when profit is distributed to shareholders, they have also taxed again as corporate income. 

Corporations have many benefits, which include Limited Liability, Easier of raising funds which are done by selling stocks, a separate legal entity, and perpetual existence in case the owner dies Corporation has its shortcoming, which includes Double Taxation and more legal paperwork as a result of its legal entity and extensive record keeping as a result of delivering it in a board meeting.

4. S-Corporation

This form of Ownership operates like Corporation, but they have different distinctive features; it allows only 100 shareholders, and it does not list all the stock for sale; it only lists one class of stock which is permitted. In this kind of Ownership, the income and losses pass to the shareholder, who then pays the tax-avoiding the problem of double tax paying like a Corporation.

Just like Corporation S-Corporation stock owners, which are the business holders, are only limited to the number of stocks they own. It runs on less paperwork but stricter rules on the ownership structure and hierarchy.

There are benefits and privileges S- corporations enjoy. These include Limited Liability, Pass through Taxation on the company or business side and no double taxation as the income and losses are all passed to shareholders. There are certain limitations in S-Corporations, including Limits on Ownership and stocks; they are restricted to 100 stockholders and can only list one class of stock; S-Corporations require more paperwork than LLCs.

5. Limited Liability Company(LLC)

These forms of Ownership are practiced by large companies all over the World, such as Google, IBM Credit LLC, Raizw Battery LLC, Hertz Vehicles LLC, Blockbuster LLC, and a lot of other powerful Businesses in the World. This form of Ownership has a structure like Corporation but has a distinctive feature in terms of passing through Tax assessment like a partnership.

In a Limited Liability Company, Owner has limited Liability just like Corporation, but they have fewer formalities compared to corporations; it also has a legal entity, and the Management in LLC is very flexible; stockholders with the highest Stocks are appointed as Chairmen or directors of the business, and this voting is commenced by shareholders who voted for the stockholders with the largest stocks. In case of a financial call-up, stocks are sold to gather Funds.

LLCs have Benefit, which includes Limited Liability, fewer regulations, a Flexible management structure, pass-through Taxation, Least paperwork. Compared to Corporations and S-Corporations, it has no board requirement, but it also has limitations which include Limited access to Capital and Limited life Span.

Factors to consider when choosing the form of Ownership in the business 

1. Limited Liability: if you want a business that you wish your Liability to be limited, fearing that you might lose your funds, you should consider LLC or Corporation as these will be much safer than partnership or entrepreneurship. In case of any landslide in the business, you can put up your stock for sale 

2. Number of Owners: if you consider the number of owners that might be interested in your business or you are the type that like owning a business alone, you can consider using Entrepreneurship. If you want the idea of having more than one owners think LLC or Corporation

3. Raising Capital: This is a crucial factor in all business. Finance is needed to set up a business, gathering finance as one single owner can be quite complicated, but with Partnership, Corporation, or LLC, the funds can be collected easily 

4. Taxes: you can avoid Taxation as an individual or the problem of double Taxation through Partnership and S-Corporation for some businesses through pass-through Taxation.LLCs Can choose how they are taxed, so this should be considered

5. Longevity: As a businessman, we want our business to sustain us after our death; you should consider choosing Choosing Corporation or LLC

Conclusion

The Forms of Ownership you choose and the legal structure are essential for your business in the short and long run; these have a big impact and implications. With the types of Ownership mentioned, there is no superior Option to choose from it, you should weigh the best option that is suitable for you and that will achieve your objective.

By going through the pros and cons of each structure and Ownership, you can consult professionally for the best advice. Choosing the best design will propel and skyrocket your business to the next level as well realizing your entrepreneurship goal. I want to see your business Grow. Read more on InvestopediaRead more extensively about the form of ownership in Indeed