Question

Explain how TWO factors have determined the form of ownership of the business

Answer 1

Answer:

The two factors that determine the form of ownership of a business are;

1. Start-up costs

2. Level of control desired

Explanation:

The form of ownership of a business defines the structure with which the business will be governed. There are different form of business ownership that exist, namely; sole proprietorship, partnerships and corporations. They all differ in different aspects as shown;

1. Sole proprietorship

A sole proprietorship as the name suggests is a business structure where there is only one owner. The owner is in charge of the business profits and liabilities. It is generally a simple business structure that needs a small company, where filing tax returns are very easy.

2. Partnerships

A partnership is a business structure where two or more parties come together to form a business. The parties are responsible for the profits depending on the amount contributed by each party. Each individual always pool their resources towards the successful completion of a given project therefor each party is liable for their own profits and risks.

3. Corporations

Corporation are similar in a way to partnerships since they involve two or more parties with the major difference being that a corporation is a separate legal entity. So the liability is always to the corporation itself and not to the parties that constitute the corporation.

Two factors that determine the form of ownership of the business are;

1. Start-up costs: if you intend to minimize the cost of starting up you business then a sole proprietorship is the best option due to its simplistic nature and very minimal start-up expenses.

2. Level of control desired: Depending on the level of control one would like to have in the business regarding decision making and the daily operations of the business. If one needs a larger level of control, the best option would be sole proprietorship, while minimal control would require a coorporation form of ownership.