Page 161 - Business Principles and Management

Unit 2

would have to go to the state to obtain a new charter or change the old one. As a
partnership, they could have added the other line of merchandise without gov-
ernment approval.

CHECKPOINT
List the disadvantages of the corporate form of ownership.

Businesses Suited to Being Corporations

Even though the corporation has major disadvantages, a survey of business firms
shows that almost every kind of business exists as a corporation, including
Web-based firms. The corporate form of ownership is especially suited to the
following types of businesses:
Ethics tip 1. Businesses that require large amounts of capital, such as airlines and
auto manufacturers. To start a 500-room hotel, for example, requires
millions of dollars for buying land and for constructing and furnishing
the hotel.
In response to perceived 2. Businesses that may have uncertain futures, such as amusement parks,
unethical corporate practice, new magazines, and novelty goods. The publisher of a new magazine, for
the U.S. government passed example, takes a great risk in assuming that the magazine will be popular
the Sarbanes-Oxley Act in enough to make a profit. Organizers of firms with uncertain futures do
2002. Officers in public (or not wish to assume the added financial risks that fall upon a proprietor
open) corporations now face or a partner in case the business fails.
much higher levels of respon-
Each form of business organization has special advantages for owners of
sibility and are held respon-
different types of businesses. Whereas the corporate form of organization is
sible for the ethical behavior
suited to firms that have uncertain futures or require large amounts of capi-
of their corporations.
tal, the partnership is especially suited to small, growing business firms. The
proprietorship, in comparison, has great appeal to the person who wants to
run a small business.

CHECKPOINT
Identify the types of businesses that would benefit from
a corporate form of ownership.

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