Exhibit 3.1. Prevalence and Profits of the Three Forms of Business Ownership
Sole proprietorships are the most common type of business in the US, accounting for 73 percent of all enterprises. However, corporations account for 70 percent of the profits earned by US businesses.
Comprehension questions
1. What is the economic entity assumption? What does this assumption require?
2. What are the three basic forms of business enterprises?
3. What is a sole proprietorship? Why is it the most common type of business in the United States?
4. List five advantages and four disadvantages of forming a sole proprietorship.
5. What is a partnership? Is it a separate legal entity?
6. Explain the difference between a general partnership, a limited partnership, and a master limited partnership.
7. Speak on advantages and disadvantages of a partnership.
8. What is a corporation? Why is it considered a separate legal entity?
9. What legal rights do corporations have?
10. Delineate the three groups that govern a corporation and describe the role of each.
11. What are major types of corporations?
12. John Brown is the owner of a successful baking company. Recently his business has been increasing and John has been thinking about changing the organization of his business from a proprietorship to a corporation. Discuss some of the advantages John would enjoy if he were to incorporate his business.
II. Vocabulary practice exercises
1. Match the columns:
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1. a partnership; 2. a sole proprietorship; 3. an economic entity; 4. a master limited partnership; 5. a corporation partners; 6. a limited partnership; 7. stock; 8. a general partnership; 9. the chief executive officer; 10. a holding company. |
а. any organization or unit in society; b. shares in the company; c. a business in which all partners are considered equal by law, and all are liable for the business’s debts; d. a business owned by two or more persons associated as partners; e. a business owned by one person; f. person appointed by a corporation’s board of directors to supervise the activities of the corporation; g. a business partnership that acts like a corporation; h. a separate legal entity having ownership divided into transferable shares of stock; i. company that owns most of another company’s stock but that does not take an active part in managing that other company; j. a partnership composed of one or more general partners and one or more partners whose liability is limited to the amount of their capital investment. |
Choose the necessary word or word-combination and put it in the sentence.
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personal rates limited liability life span corporation |
master limited partnership sole proprietorship board of directors parent company |
unlimited liability partnerships partnership agreement charitable, educational, and fraternal organizations |
1.The most common and the simplest form of business ownership is ________.
2.The owners of a _______ are known as shareholders.
3.Conflict among the owners in a business is most likely to occur in ________.
4. _________ means that any damages or debts of the business can be attached to the owner.
5.It’s always wise to get a lawyer’s advice on the _______ – the legal document that sets forth the partners’ rights and responsibilities.
6. _______ have advantages similar to those of corporations – limited liability, unlimited life, and transferable ownership.
7.Profits and losses of proprietorships and partnerships are taxed at ________.
8.Owners of the corporation enjoy ________.
9.The corporate officers are elected by ________
10.Sole proprietorships often have a limited ________, in other words the business may cease when the owner dies.
11. General Electric is a large _________, having 27 subsidiaries.
12. Not-for-profit corporations include _________.
3. Say whether these statements are true or false. Give your reasons.
1. A sole proprietorship is the most complex and the most expensive form of business to start.
2. A partnership, like a proprietorship, is not a separate legal entity.
3. A company needn’t be large to incorporate.
4. The board of directors carries out the policies and decisions of the corporate officers.
5. Compared to other forms of business organizations, the proprietorship enjoys the advantage of raising large sums of capital.
6. Corporations are typically the largest in size and volume of business.
7. All partnerships are taxed at corporate rates.
8. The corporation’s unlimited life span, combined with its ability to raise capital, gives it the potential for significant growth.
9. Like proprietorships, corporations are easy to form.
10. In a limited partnership, all partners are equal by law, and all are liable for the business’s debts.
11. Government-owned corporations are corporations with no more than 75 owners.
12. Companies that own most of another company’s stock are called subsidiary corporations.
13. Harvard University is a not-for-profit corporation.
4. Language study. Complete the following chart.
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Person |
Noun |
Verb |
Adjective |
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owner |
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employment |
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execute |
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contributory |
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election |
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regulator |
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partner |
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agreeable |
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transferee |
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activity |
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proprietary |
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liquidate |
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investor |
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restrictive |
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performance |
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obligate |
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supervisory |