Basic Forms of Business Organization

Business is the production, distribution, and sale of goods and services for the benefit of the buyer and the profit of the seller. In the modern world the control of production is largely in the hands of individual business people or entrepreneurs, who organize and direct industry for gaining profits.

All businesses are known to take one of three basic forms: the sole proprietorship, the partnership, and the corporation.

A sole proprietorship is the simplest way of starting a business. In this form of organization the owner himself is responsible for success or failure of his business. Any line of business is open to him. Although this form has its advantages, it has certain drawbacks, too. In the first place the single owner is seldom able to invest as much capital as can be invested by a partnership or a corporation. If single owners are able to invest large amounts of capital, they run great risk of losing it all because they are personally liable for all the debts of their businesses. This is called unlimited liability.

A partnership is voluntary legal association of two or more people for the purpose of running a business. All partners are responsible for the debts of the partnership and profits and losses are shared between them. The agreement to form an association of this nature is called a partnership contract and may include distribution of profits, fiscal responsibilities, and a specific length of time during which the partnership is in effect.

A corporation is a firm that exists as an independent legal entity, with ownership divided into shares. The owners of the shares are known as stockholders. The main feature of the corporation is limited liability. It means that the liability of the stockholders for the debts of the firm is limited to the amount of money they paid to buy shares. It is the dominant form of American business because it makes possible to gather together large amount of capital. The stockholders usually meet once a year to elect directors and to carry on other important business. Management of a corporation consists of the board of directors, who decide corporate policy, and the officers, who carry on the daily operations. The board is elected by the stockholders, and the officers are appointed by the board. The corporation form of business has several advantages over the sole proprietorship and partnership. It is a separate legal entity and officer’s limited liability to the owners, ease of capital generation and ease of transfer of ownership. In addition, it allows centralized authority and responsibility and professional management. The corporation form of business also has several disadvantages. It is subject to greater government regulation and double taxation. In addition, separation of ownership and control may allow management to make harmful decisions. Since no one form of business organization is perfect, so – called hybrids have been devised like: franchises, limited partnerships, cooperatives, and joint ventures.

Задание 2. Ответьте на вопросы.

1. What is business?

2. Who can be called an entrepreneur?

3. What are the advantages of a sole proprietorship?

4. What is a partnership?

5. Why is a corporation the dominant form of American business?

6. What disadvantages has the corporation form of business?

Задание 3. Найдите английские эквиваленты в тексте следующим фразам.

1. распределение товаров для выгоды покупателя и прибыли продавца;

2. определённые недостатки;

3. быть ответственным за неудачу в бизнесе;

4. вкладывать большое количество капитала;

5. распределять прибыль и убытки;

6. контракт товарищества;

7. финансовая ответственность;

8. Акционеры – это владельцы акций.

9. совет директоров;

10. государственное регулирование и взимание налогов.