For each type of decision, give an example of a business transaction that would be relevant. 
Question two:
Sole Proprietorships and Partnerships. What are the four primary disadvantages to the sole proprietorship and partnership forms of business organisation? What benefits are there to these types of business organisation as opposed to the corporate form?  (Ross, 11/2020, p. 19)


Question 3:
Corporations. What is the primary disadvantage of the corporate form of organisation? Name at least two of the advantages of corporate organisation. LO 1.3 (Ross, 11/2020, p. 19)

Question 4:

Agency Problems. Who owns a corporation? Describe the process whereby the owners control the firm’s management. What is the main reason that an agency relationship exists in the corporate form of organisation? In this context, what kinds of problems can arise? LO 1.4 (Ross, 11/2020, p. 19)

 

 

Q4
Who owns a company?
Shareholders own a corporation

What is the process in which the owners control the firm's management?
The owners control management because the elect the board of directors, who, in turn, choose the business' management.
What is the main reason for this 'Agency Relationship'
An agency relationship, where a principle (in this case the board of directors) hires an agent (the managers) to represent their interest. In a corporate environment, this occurs when the shareholders hire managers to run the company.
What kinds of Agency Problems can arise in this kind of environment?
An agency problem, in this case, would be when the shareholders want one thing, but the managers want something else. This prompts shareholders to offer enormous payment packages to CEOs & other high management so that they are more likely to represent their best interest appropriately.

Working capital management: Office equipment 


Sole trader
Partnership
Public Company
Private company

Q2
Disadvantages

Equity capital limited to owner’s personal wealth

Unlimited liability

Difficult to transfer ownership

Partnership dissolves when one partner dies or wishes to sell

 

Advantages compared to a corporate form

Easy to start

Taxed once as personal income 

Q3
More complicated 

Requires a constitution 

Taxation of company profits can be an issue

 

Advantages: limited liability, ability to raise capital.

Q3. 
Advantages:
Unlimited life
Limited Liability
Protection

Disadvantages: 
More complicated
Expensive

Q4.