Business Organization free essay sample

An Entrepreneur or business owner will sell stock to investors, and in return, promise the investors a percentage of the company’s profits, based on how much stock they buy. We see this in larger businesses in the US, most notably during the market crash we experienced a couple years ago. Independent investors as well as other companies bought and shared stock with many of the big banking corporations, since the bands values began to drop, shareholders were trying to get rid of their stock in the company, just to be able to get their money back. This caused frenzy in the stock market, and we saw banks crash overnight. Banks no longer had the money to manage their day to day operations, and they found themselves actually in debt to many of their customers. So many customers lost their 401k’s and other investments, because the funds were simply no longer there, thanks to the withdrawal of banking investors. We will write a custom essay sample on Business Organization or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page Another example is the new TV show, ‘Shark Tank’, where wealthy investors will give small business owners a chance to pitch a deal to them. The owner will ask for a certain amount of investment in order to grow their company, in return a share of the profits with the investor from their business. This is an interesting show to watch, because it kind of gives a more personal feel to the stock market, and insight as to how investors think and view businesses to decide on whether or not they would be a profitable investment. Limited liability Company In a limited liability situation, an Entrepreneur or business owner is not personally liable for the company. This is the way the business owners can protect their personal assets, in case their business goes bankrupt. The only money that is at risk is what has been invested in the company by the stockholders. If I was a going to start a business, I would want to try to establish capital without needing to put up my house or car or any of my personal belongings as collateral for a loan. If I was able to do so, I would also want to have limited liability to my business. If my new business fails, my house and my car would not be seized to pay off any company debts, I would be able to simply ‘walk away’ from the venture, and still have my personal belongings. This can have a negative impact on some businesses, as some people will create a new business that is fraudulent or not credible. Since the business owner has no personal liability to the company, we sometimes see people who will take advantage of the situation, and will operate a fraudulent and corrupted company that will steal investors’ money. Partnership In a partnership, two people agree to go into a business venture with one another, and agree on terms for the business, like the dividing of profit and responsibility. There are a couple different variances of this kind of ownership; the first is the obvious partnership. Two people will pool together their experience and resources to start a construction company for example. One person will invest a little more than the other, so the partners agree to split profits 60%/40%, the 60% going to the partner who was able to invest more. This is similar to a joint stock company, the more that is invested, the more that is returned. Both partners can agree to share responsibility and involvement in the company’s day to day business. For example, one partner has better accounting and project planning skills, so they will handle all of the paperwork and office duties related to the business; while the other partner who is skilled in construction, will be responsible for completing jobs and projects to earn money for the company. Both partners have an equally important role in the business. Another example of Partnership is having a ‘silent partner’. In this case, a company will have more than one owner, but one will chose to stay uninvolved with the companies’ day to day operations, and will simply serve as an investor for the company, while the other partner runs the business. Sole Proprietorship In this type of business, a company is owned entirely by one single person. This person is responsible for everything relating to the company. Unfortunately, since the businesses only existence is its owner, this means that the owner is personally responsible for the business. If the business goes bankrupt, or had debt, then the owner accepts those liabilities personally, meaning their house or can be seized to pay off debt. For example, my I know someone who owns a construction company. He has no investors, no stocks, no partners, and no corporation or legal entity to share the burden of liability. If a customer decides to sue the owner for faulty work and wins in court, the court has the right to place a judgment against the owner personally, and has the right to take his house, and anything else he owns with value in order to pay off the judgment that is owed to the customer. This leaves him open to a great deal of liability. At the same time, this is beneficial to him because he currently does not have to share his profits from the business with anyone. He doesn’t have investors or a partner that he has to split the profits with, he can make as much profit as he can and keep every penny of it. He doesn’t have to answer to anyone regarding the company either, he can make decisions himself, and do as he sees fit for his business; Freedom, but with a great deal of liability.