114 Why It Matters: Legal Ownership

Why distinguish among the legal forms of ownership for a business?

It may seem that learning about the various ways that businesses can be formed and operate under the legal system is something that should be left to the lawyers and students of the law. However, the way a business is formed as a legal entity has implications far beyond the business. Did you know that if your business fails and you can’t pay your business creditors the money you owe them that you can lose your home, car, and most of your personal belongings? Or, if you select the wrong legal form of ownership, you can find yourself in a position of owing a large sum of money to the Internal Revenue Service? Did you realize that if your business has not been formed in a way that protects you if someone slips and falls in your store that you could be personally liable for their pain and suffering?

NOW, do you still think that the legal side of forming a business is just for lawyers? If not, then you are getting the idea behind this module. If you’re not sure, take a look at the video below and see what happened to a family who ran their own business as a sole proprietorship and experienced the impact of the recent recession. After watching the video, you will spend the remainder of this module learning about forms of ownership, options available to business owners, and even places where you can get assistance.

Learning Outcomes

• Recognize the advantages and disadvantages of the various forms of business ownership relative to a business opportunity
• Differentiate among the different types of corporations available to business owners (C, S, B)
• Explain the concept of franchising and the associated risks and benefits to the franchisor and franchisee
• Explain how a business can expand market share and diversify through mergers and acquisitions
• Identify sources of assistance available to individuals to start a business