OpenLearn Search website Back to top. Nonprofit cooperatives are a common form of social enterprise particularly in developing countries. Here is the calculation: These businesses operate in accordance to standard laws for small business.
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Sole traders can take on employees — the term implies that they own the business on their own, not that they must work there alone. Limited company — an organisation set up by its owners to run their business. A limited company is a legal person. Of course, a company is not a person in the sense we commonly understand it. What the term means is that the law regards a limited company as having the same legal standing as a person, i.
For example, a limited company can own property. Any profit made after taxes belongs to the company. The company can then share its profits, most commonly among all the owners. This means that they do not have to pay out of their personal income or assets if the company runs into financial difficulties. There are two main types of limited company: The shares of public limited companies PLCs are traded in the stock market, where anybody can buy shares in the company if they wish to do so.
Private limited companies are not traded in the stock market and other people can only buy shares in them with the approval of the current owners for example, if they are invited to invest in the company by the current owners. Business partnerships — an arrangement where two or more individuals share the ownership of a business. There are two main types of partnership: In a general partnership all partners are personally responsible for the business, meaning they are liable for any losses or debts with their personal income or wealth if necessary.
In a limited partnership partners are not personally liable if the business incurs any losses or debts. Profits from a partnership are shared between the partners and each partner then pays taxes on their share.
There are a lot of fine details and several possible permutations in the structure of business partnerships, which are important when setting one up but need not concern us any further here. Previous 3 Classifying businesses by industry sector. Next 5 Examples of different businesses. Public ownership may be practiced in the form of decision-making and participation as long as the organization is a going concern. Similar to traditional nonprofits, a public ownership structure indicates that governing board of directors directs strategy and financial oversight.
Legally, nonprofit ownership becomes an issue if the owner s wants to sell the social enterprise, or close it and liquidates the assets. Private ownership of a social enterprise offers benefits of equity financing, unambiguous asset ownership and valuation, and the freedom to sell the enterprise. Conflict can arise between fundamental motives of profit-making and mission.
For-profits must minimally breakeven and often have tax liabilities, limiting the type and purpose of the enterprise to more productive and financially driven models than those that may serve a social need , yet run at a deficit. Nonprofit Organizations -- the classic nonprofit organization is considered "public good," or property of the public.
Nonprofits may own a for-profit or nonprofit social enterprise subsidiary. In the case of the for-profit, the nonprofit may sell the subsidiary or its assets, or raise equity for new investments; whereas the nonprofit subsidiary may raise charitable funds, but not equity and is subject to donor requirements and nonprofit law regarding ownership of assets and use of revenue.
The nonprofit parent of the nonprofit subsidiary may acquire the assets of the social enterprise if the business fails or is closed. Public Shareholders -- a consortium of nonprofit stakeholders that "hold shares" in a social enterprise nonprofit or for-profit.
Often the shareholders are comprised of parent organizations, partners and donors that have an existing program or financial stake in the social enterprise. Legal issues are similar for other public entities under this ownership structure.
The public shareholder model is frequently used as an exit strategy when a parent organization seeks to spin off a social enterprise into an autonomous legal entity, yet wants to maintain some decision making power and preserve the mission during the transitional period to independence.
Nonprofit cooperatives are a common form of social enterprise particularly in developing countries. The ownership structure is defined by the distribution of equity with regard to votes and capital but also by the identity of the equity owners.
These structures are of major importance in corporate governance because they determine the incentives of managers and thereby the economic efficiency of the corporations they manage. A classic reference is Jensen and Meckling . An excellent newer reference on the topic is Holderness, Kroszner, and Sheehan . Contents Table - Hypotheses: Effects of ownership structures on corporate performance and other other kinds of institutions of relevance for corporate governance.
Exhibition - Theory review: A review of the theory on managerial ownership and financial performance.
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1 Types of Ownership Structures The most common ways to organize a business: Sole Proprietorship Partnership Limited partnership Limited Liability Company (LLC) Corporation (for-profit) Nonprofit Corporation (not-for-profit) Cooperative. Sole Proprietorships and Partnerships For many new businesses, the best initial ownership structure is either a sole. Choosing the Best Ownership Structure for Your Business The right structure -- corporation, LLC, partnership, or sole proprietorship -- depends on who will own your business and what its . Legal forms and ownership structures of businesses are different from country to country. In the United Kingdom the majority of businesses (but not all) are sole traders, limited companies or business partnerships (UK Government, n.d.).