INF10009 Introduction to Business Information Systems READING : BUSINESS BASICS SWN BUR . NE . Three Common Business Structures Sole proprietorship The sole proprietorship is a business form in which a single person is the sole owner and is personally responsible for all the profits and losses of the business. Partnership Partnerships are similar to sole proprietorships, except that this legal structure allows for more than one owner. Each partner is personally responsible for all the profits and losses of the business. Corporation The corporation is the most sophisticated form of business entity and the most common among large companies. The corporation (also called, organisation, enterprise, or business) is an artificially created legal entity that exists separate and apart from those individuals who created it and carry on its operations. In a corporation, the business entity is separate from the business owners. Shareholder - another term for business owners An important advantage of a corporation is that it offers the shareholders limited liability Limited liability - the shareholders are not personally liable for the losses incurred by the corporation Two general types of corporations: • For profit corporation - focuses on making money and all profits and losses are shared by the business owners e.g. Target, Microsoft • Not for profit (or nonprofit) corporation - usually exist to accomplish some charitable, humanitarian, or educational purpose, and the profits and losses are not shared by the business owners e.g. hospitals, The Smith Family, Zoos Reasons businesses choose to incorporate: • Limited liability - In most instances, financial losses or judgments against the corporation are limited to the assets owned by the corporation • Unlimited life - Unlike sole proprietorships and partnerships, the life of the corporation is not dependent on the life of a particular individual or individuals. It can continue indefinitely until it accomplishes its objective, merges with another business, or goes bankrupt. Unless stated otherwise, it could go on indefinitely. • Transferability of shares - It is easy to sell, transfer, or give the ownership interest in a corporation to another person. The process of divesting sole proprietorships or partnerships can be cumbersome and costly. Property has to be re-titled, new deeds drawn, and other administrative steps taken any time the slightest change of ownership occurs. With a corporation, all of the individual owners' rights and privileges are represented by the shares of stock they own. Corporations can quickly transfer ownership by simply having the shareholders endorse the back of each stock certificate to another party. • Ability to raise investment capital - It is easy to attract new investors into a corporate entity because of limited liability and the easy transferability of ownership @Copyright: 2016 Swinburne University of Technology Business Basics Version 2.1 Updated Josephine Pow CRICOS: 073432E TOID: 3059 22/01/2017 Page 1 of 4
INF10009 Introduction to Business Information Systems READING : BUSINESS BASICS SWN BUR . NE . Seven departments commonly found in most organisations Accounting provides quantitative information about the finances of the business including