Forms of Business Enterprise

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Throughout the world, wherever business enterprises are carried on, there are to be found three basic forms in which the ownership of these enterprises is held.

. The individual owning outright his own business and usually managing it himself without much cooperation or assistance.( sole proprietorship)

. A group of owners, working together under some form of partnership agreement.

. The impersonal owner - the corporation - standing between the business and the individuals who have various kinds and degrees of claims upon the business.

These three basic forms are combined and recombined in many different ways under the' laws and customs of the various commercial countries, but analysis always reveals one or the other of the three forms predominating.

This is shown by the short description, which has been added, of three other forms of business organization not often used but of interest, as showing how difficult it is to get away from the basic types. These are the limited partnership, the joint-stock company, and the association under deed of trust.

The first two of these basic forms - sole proprietorship and partnership - represent the personal relationship of a man or a group of men to the business; but the third form, which is a comparatively modern invention, separates the owner or owners from the business and brings into being an impersonal, intangible thing - a corporation - in which the nominal ownership is vested.

It has been pointed out by writers on economics that there are three elements that must be distributed under any form of ownership; these three elements are risk, income, and management. In the individual proprietorship the three are centered in one man who risks his own capital, undertakes the management, and receives all the income. Under the partnership form, the partners as a body, like the individual owner, undertake the risk and management and receive the income; but among themselves there may be an infinite number of...
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