Define the meaning of different forms of ownership
There are different forms of ownership in business that determine how the entity is owned and operated. The most common forms of ownership include:
1. Sole proprietorship: A business that is owned by one person who is responsible for all aspects of the business. The owner earns all profits and bears all risks and losses.
2. Partnership: A business that is owned by two or more individuals who share profits and losses. Partnerships can be general or limited, depending on the level of liability each partner has.
3. Limited Liability Company (LLC): A business entity that offers limited liability protection to its owners (known as members). Members of an LLC are not personally liable for the company’s debts or obligations, and their personal assets are protected.
4. Corporation: A legal entity that is separate from its owners (known as shareholders). Corporations can issue stock, and profits are distributed to shareholders in the form of dividends.
5. Cooperative: A business owned and operated by its members, who share profits and decision-making responsibilities.
Each form of ownership has its advantages and disadvantages in terms of liability, tax implications, control, and management structure. Choosing the right form of ownership depends on the specific needs and goals of the business.