Page 149 - Business Principles and Management

Chapter
6 Corporate Forms

of Business Ownership

6.1 Corporations

6.2 Close and Open Corporations

6.3 Specialized Types of Organizations

RE ALITY CHECK

Corporate Concept

hanh Vu came to this country from Vietnam 10 years ago and earned
a college business degree. After graduation he worked as a manager in
Ta small firm, where he learned a great deal. But after five years, the
job became less challenging. He wondered about opening his own business
with the money he had saved, but that seemed too risky.
Surely there was some way to be an entrepreneur without having to
assume so much responsibility alone or with a partner. The partnership
idea sounded acceptable, but fear of lawsuits from creditors if he didn’t
do well haunted him. Yet his fear of unlimited liability did not stop him
from thinking about starting a business.
On his way home from work one day, Thanh stopped to get his hair
styled. He overheard two other customers talking about changing their
small partnership to a corporation. One said, “We would pay higher
taxes.” The other responded, “But our financial liability would be less
than in our partnership.” Thanh listened intently but said nothing until
after the first person replied, “But we can’t expand our successful busi-
ness unless we can raise more money.”
By now Thanh could no longer restrain himself. “Excuse me for listening,
but I have an idea. I’m a manager and have a degree in business; but more
important, I’m looking for an opportunity to become a business owner.”
The two men looked at each other and nodded. “Let’s hear your idea,”
one said cautiously.
“There’s a special type of corporation that permits you to be a corporation
but allows you to pay taxes as if you were still a partnership,” Thanh replied.
“And if you’re looking for another stockholder who can invest some money
and help expand the business, I’d be very interested in talking with you.”
After the introductions and handshakes, they scheduled a luncheon
meeting for the next day.

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