Mini Case Essay

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Mini Case Why is corporate finance important to all managers? Corporate fiancé is the basic component of how business is run. It is necessary to direct funds or products in a company. Corporate finance also helps managers to forecast the funding requirements of their company and the necessary strategies to acquire those funds. Describe the organizational forms a company might have as it evolves from a start-up to a major corporation. List the advantages and disadvantages of each form. There are three major forms of business organizations: sole proprietorship, partnerships and corporations. Proprietorships are unincorporated businesses owned by one individual. Proprietorship has three important advantages: it is easily and inexpensively formed; its subject to few government regulations and; its income is not subject to corporate taxation but is taxed as a part of the proprietor’s income. Limitations include: difficulty obtaining capital needed for growth; having an unlimited personal liability for business debts can result in losses that exceed the money invested in the company and; life of a proprietorship is limited to life of its founder. For these reasons sole proprietorship is used mainly for small businesses. A partnership exists when there are two or more persons or entities associate to conduct non-corporate business for profit. Partnership agreements define the ways that any profits and losses are shared between partners. Advantages and disadvantages are similar to those of a proprietorship. The major advantage of a partnership is its low cost and ease of formation. With regards to liabilities, partners can potentially lose all their personal assets, including those not invested in the business, because under partnership law, each partner is liable for the business’s debts. Corporations are legal entities created under state law and are separate and

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