Unit XI

Pre-reading task

Discuss the following questions:

1. Have you ever thought of starting your own business? What kind of business would it be?

2. What are the major forms of business organization?

3. What are the advantages and disadvantages of each form of business ownership?

Task 1. Read the text to understand what information is of primary importance or new for you.

Company law

The three major types of business organization in the UK, the USA and most countries are: (1) sole traders (sole proprietorships), (2) partnerships and (3) companies (US - corporations).

A sole traders (sole proprietorships) is an unincorporated business, set up, owned and managed by one person. The person provides all capital, makes his own decisions, assumes all risks, has the sole rights to all profits, and has unlimited liability for business debts, even if this means selling personal assets. Sole proprietorship is the most common and numerous form of business organization.

A partnership is an unincorporated business organization that is owned by two or more persons. Partnerships are found in all areas of business activity, especially in law, accountancy and medicine.

There are several types of partnerships: (1) unlimited partnership (general partnership), (2) limited partnership, and (3) master limited partnership.

A general partnership is a partnership in which all owners share in operating the business and in assuming unlimited liability for the business debts. There are three key elements of any general partnership: (1) common ownership, (2) shared profits and losses, (3) the right to participate in managing the operation of the business.

A limited partnership is a partnership with one or more general partners and one or more sleeping or silent partner (limited partner). A general partner is an owner who has unlimited liability and is active in managing the firm. A silent partner is a partner who invests in the firm, but does not participate in the management and has limited liability – in case of bankruptcy he only loses his investment, not his personal assets.

A new form of partnership, master limited partnership, is similar to a company (corporation) ─ it acts like a company and is traded on the stock exchanges like a company, but is taxed like partnership and thus avoids the corporate income tax.

A company (US - corporation) is a legal entity allowed by legislation, with authority to act and have liability separate from its owners. It means that company’s owners, shareholders (US - stockholders) are not liable for the debts of the company beyond the money they invest.

There are two kinds of companies: the public limited companies (US – open corporations) and the private limited companies (US – closed corporations). The question of whether a company is public or private is determined by the method by which its shares are sold. Public limited companies sell their shares to the public, for example on the stock exchange. The law requires that these public companies disclose information about their finance and operations in order to give people information about companies in which they might invest. But such information may also be of value to the competitors. For that reason, some companies have chosen to remain private ones. In a private limited company all shareholders must agree before any shares can be sold or bought.

Not all business organizations fall neatly into categories described above. Other types of business organizations may include: public corporations – corporations that are owned and managed by the government, cooperatives, nonprofit organizations, joint ventures.

Task 2. Find in the text above the English equivalents for the following words and expressions. Memorize them. Use them in the context of your own.

Приватне підприємство, фондова біржа, прибутковий податок, повне товариство, закрита акціонерна компанія, обмежена відповідальність, брати на себе ризики, командитне товариство, необмежена відповідальність, відкрите командитне товариство, спільна власність, прибутки та збитки, відкрита акціонерна компанія, спільне підприємство, головний партнер, пасивний партнер, нести відповідальність за борги, продавати акції, розголошувати відомості.

Task 3. Give the Ukrainian equivalents for:

unincorporated business, to assume all risks, to sell personal assets, shared profits and losses, income tax., to be liable for the debts of the company, joint ventures, to disclose information, unlimited liability, rights to profits, common ownership, to participate in the management.

Task 4. Match the following English words with their definitions:

1) managing director	(a) to make (information) known
2) shareholder	(b) an incorporated business organization that is owned by two or more persons
3) sole proprietorship	(c) someone who owns shares in a company
4) partnership	(d) an unincorporated business, set up, owned and managed by one person
5) liability	(e) the legal state of possessing something
6) taxation	(f) something belonging to the individual or a business that has value
7) legal entity	(g) the responsibility that a person or organization has for loss, damage, or injury caused to others, or for payment of debts
8) asset	(h) the act or principle of levying taxes or the condition of being taxed
9) ownership	(i) company’s chief administrative officer
10) disclose	(j) organization allowed by legislation that can enter into contracts, is responsible for its actions and can be sued for damages

Task 5. Read the following sentences and decide whether they are true or false. Correct the false ones.

1. Sole proprietorship is not liable for its debts.

2. A sleeping partner does not play an active role in a business.

3. Shareholders are not responsible for the debts of the company beyond the money they invest.

4. A master limited partnership has to pay corporate income tax.

5. All owners of a general partnership take part in managing their business.

6. Private limited companies usually sell their shares on the stock exchange.

Task 6. Answer the following questions:

1.What are the three major types of business organization in the UK, the USA and most countries?

2. What is the sole proprietorship?

3. What type of business organization is a partnership?

4. What are three types of partnership?

5. What are two kinds of companies?

6. What is the main difference between a private and public limited company?

7. What other types of business organizations do you know?

Task 7. Look at the table and decide which legal entity (a - e) is described in each row (1 - 5).

(a) private limited company

(b) general partnership

(c) public limited company

(d) limited partnership

(e) sole proprietorship

Entity	Liability of owners	Capital contribution	Management
1	Unlimited personal liability for the obligations of the business	Capital needed is contributed by the sole proprietor.	Business is managed by the sole proprietor.
2	Generally no personal liability of the members for the obligations of the business	No minimum share capital requirement. However, capital can be raised through the issuance of shares to members or through a guarantee.	Company is managed through its managing director or the board of directors acting as a whole.
3	No personal liability; liability is generally limited to shareholders contributions.	The minimum share capital of 50 000 is raised through issuance of shares to the public and/or existing members.	Company is managed by the board of directors; shareholders have no power to participate in management.
4	Unlimited personal liability of the general partners for the obligations of the business	Partners contribute money or services to the partnership; they share profits and losses.	The partners have equal management rights, unless they agree otherwise.
5	Unlimited personal liability of the general partners for the obligations of the business; limited partners generally have no personal liability.	Partners contribute money or services to the partnership; they share profits and losses.	The general partner manages the business.

Task 8. Group work.

Decide what sort of business you would start in the situations given below. Think of more than one possibility. Explain your choice.

1. You and your spouse (husband and wife) want to start a grocery shop in a small village. There is already one grocery shop in the village owned by an old lady. Your bank will lend you the money you need.

2. Two couples have enough money to buy a small hotel, which they all will work in. One of the couples has two young children.

3. You want to sell fruit and vegetables from a stall at the market. You need ₤500 capital, which you can borrow from your father.

Task 9. Translate the following words and phrases. Use them to translate the text:

business association, authorized capital, principal value, to alienate, public (private) placement of shares, preemption right, annual financial report, audit report, Public register.

Акціонерне товариство — господарське товариство, статутний капітал якого не може бути меншим ніж 1250 мінімальних заробітних плат і який поділено на визначену кількість акцій однакової номінальної вартості. Акціонерні товариства створюються в формі публічних або приватних товариств. Основним актом законодавства, який регулює діяльність акціонерних товариства, є Закон "Про акціонерні товариства"

Особливостями публічного акціонерного товариства є:

• акціонери можуть відчужувати належні їм акції без згоди інших акціонерів та товариства

• товариство може здійснювати як публічне, так і приватне розміщення акцій

• при публічному розміщенні акцій акціонери не мають переважного права на придбання акцій

• річна фінансова звітність товариства підлягає обов'язковій перевірці незалежним аудитором, а також оприлюдненню (разом із аудиторським висновком)

Особливостями приватного акціонерного товариства є:

• максимальна кількість акціонерів не може перевищувати 100 осіб

• товариство може здійснювати тільки приватне розміщення акцій

• статутом товариства може бути передбачено переважне право акціонерів та самого товариства на придбання акцій цього товариства, що пропонуються їх власником до продажу третій особі

• акції приватного акціонерного товариства не можуть купуватися та/або продаватися на фондовій біржі

• товариство не зобов'язане розкривати свою фінансову звітність на фондовому ринку, хоча зобов'язане оприлюднювати фінансову звітність у Державному реєстрі юридичних осіб, як і будь-яка інша юридична особа, зереєстрована в Україні.