Nuc University Rio Grande Campus

Fina 2100
Professor: Silvino Cepeda

Organization and governance of the company

Yachira Rivera Villalongo

Num is. 1402987876
Fecha: 13 de mar. de 23
Task 1.2

1. Sole proprietorships - A sole proprietorship is a business owned by one person.

and is operated by one person. The sole owner is a person who performs

businesses exclusively for oneself (Griffin, 2019). He only provides the capital and the

skills and is the sole responsible for the company's results. In fact, the

The sole owner is the supreme judge of all matters related to their business.

subject only to the general laws of the country and to any special legislation that may apply

affect their particular business. When a business owner expands their business, they have

to hire a manager or to hire a partner to handle capital issues

and administration.

Features

Unique property

Control of a man

Undivided risk

Unlimited liability

Without a separate entity from the business

Advantages

Simplicity: it is very easy to establish and dissolve a sole proprietorship. No requirements are needed.

legal documents and formalities involved. Any person competent to enter into

un contrato puede iniciarlo. Sin embargo, en algunos casos, es decir, de una farmacia, se debe

obtain a municipal license. You can start your business from your own home.
 Quick decisions: the entrepreneur does not need to consult anyone to make his decisions.

business matters. Therefore, you can make decisions on the ground to

take advantage of opportunities once in a while. He is his own boss.

Top secret: the owner does not have to publish their accounts and only they know them.

trade secrets. The maintenance of secrets protects you from the

competitors.

Direct motivation: there is a direct relationship between efforts and the

rewards. No one shares the profits of the businesses. Therefore, the

The entrepreneur has sufficient incentives to work hard.

Personal touch: the owner can maintain personal contacts with their

employees and clients. These contacts help the growth of the company.

Flexibility - In the absence of government control, there is complete freedom of action.

There is no room for differences of opinion or coordination problems.

Disadvantages:

Limited funds: an owner can raise limited financial resources.

As a result, the size of the company remains small. There is a margin

limited for growth and expansion. Economies of scale are not available.

scale.

Limited skills: the property is a one-man show and a

a man cannot be an expert in all areas (production, marketing,

financing, staff, etc.) of the businesses. There is no room for the

specialization and decisions may not be balanced.

 Unlimited liability: the owner's liability is unlimited. In case of

loss, their private assets can also be used to pay creditors. This

discourages the expansion of the company.

2. 2- Societies A society constitutes a formal agreement between two or more people.

that agree to manage a business together. It can also be established between

two or more companies or between companies and individuals (Griffin, 2019). The agreement of

association clearly establishes the amount of authority, potential gains and

the responsibilities that each partner must pay. Although the partners share

benefits and responsibilities, the choices of a partner can affect

potentially to the entire company.

2- Societies A society constitutes a formal agreement between two or more people who agree

manage a business together. It can also be established between two or more companies or

between companies and individuals (Griffin, 2019). The partnership agreement clearly establishes the

amount of authority, the potential earnings, and the responsibilities that must be paid by each

partner. Although partners share benefits and responsibilities, the choices of a partner

they can potentially affect the entire company.

Characteristics

Association of two or more people

Contractual relationship: written or oral agreement between partners.

Existence of a lawful business

Distribution of profits and losses

Mutual agency between partners

No separate legal entity from the firm.

 Unlimited liability

Restriction on the transfer of interests

Advantages

Closing the gap in experience and knowledge

More effective A potential partner can provide an injection of cash to

business.

Cost savings Having a business partner would allow you to share the burden

financial management of the necessary expenses and capital expenditures to run the business.

One of the advantages of having a business partner is sharing the work.

Better work-life balance: by sharing the work, a

A partner can also lighten the load.

Potential tax benefits: A possible advantage of a general partnership.

it can be a tax benefit

Disadvantages

In addition to sharing profits and assets, a partnership also involves

share the business losses.

While it is likely that you enjoy having total control over your business, in a

society, would now share control with a partner and important decisions would

they would take together.

As circumstances change in the future, it is possible that you or your

partners want to sell the business.

When weighing the advantages and disadvantages of a partnership, you must also

consider whether you can cope with unpredictability

 3. Corporations - Corporations are companies that have been authorized to act.

as unique entities. When the owner of a business incorporates their business,

essentially separates his personal responsibility from that of the company. The

corporations have many of the rights and responsibilities that they enjoy

people, such as owning assets, hiring employees, and paying taxes

(Griffin, 2019). However, they are subject to state regulation, with a structure

of the junta imposed by the state and the taxation of commercial income

personal. Owning a corporation is usually more flexible than other types

of business, as it can be transferred in the form of shares. However, the great

amount of rules and regulations that a corporation must generally follow

it means that I may have to pay higher costs for accountants and

lawyers compared to other types of businesses.

Characteristics

Acquisition of capital. It may be easier for a corporation to acquire debt and

social capital, since it is not limited by the financial resources of a few

owners. Dividends. A corporation pays its investors by issuing them

dividends.

Double taxation. A corporation pays income tax on its

earnings.

Limited liability. The liabilities incurred by a corporation do not also

they are transferred to their shareholders. In contrast, anyone who tries to enforce

A liability can only pursue the corporate entity to obtain

satisfaction.
 Property. The ownership of a corporation is based on the number of shares.

that possesses.

Separate entity. A corporation is considered a legal and operational entity.

completely separate.

Advantages

A corporation provides more personal asset liability protection to its

owners than any other type of entity.

The ownership of the corporation is based on the percentage of stock ownership.

which offers much more flexibility than other types of entities in terms of

transfer the ownership and perpetuate the business in the long term.

Since most corporations sell the property through

stocks that are traded on the stock market can easily raise funds by selling

actions.

Although some corporations (C corporations) are subject to double

imposition, other corporate structures (S corporations) have benefits

tax authorities, depending on how their income is distributed.

Disadvantages

Presenting your articles of incorporation with your secretary of state can be

fast, but the overall onboarding process tends to be long.

Along with the long application process, there is the amount of time and energy

necessary to properly maintain a corporation and comply with the

legal requirements.
 Most corporations (like C-corps) face double taxation,

which means that business income is taxed at the entity level, thereby

as a shareholder level (according to their percentage of earnings obtained).

Corporations are expensive to form and operate. It can be easy for corporations

established to obtain capital through the sale of shares, but to form and

Maintaining a corporation can be costly.

4. Limited liability companies - Just like with corporations,

limited liability companies separate the liability of the owners

of the company. They can pay taxes as corporations or as partnerships,

and can be owned by many different types of business entities, such as

trusts, corporations, individuals, and other LLCs. Although similar in structure to

S corporations and LLCs do not put the personal belongings of their members at risk.

shareholders, separating personal responsibilities from those generated by the company

(Griffin, 2019). In addition, unlike S corporations, there are fewer rules

and regulations that the company must follow, which reduces time and money

spent with accountants and lawyers.

Characteristics

Limited liability companies have a legal identity separate from

its owners, also known as members.

Offers limited liability protection to its members.

LLCs also offer a lot of flexibility in terms of tax treatment.

 While an LLC offers you the benefits of a corporation, you can still enjoy

of the simplicity of a partnership business in terms of forming and operating it

company.

To form an LLC, you must prepare and file the articles of organization with

the state agency (generally the Secretariat of State) where it is located

main place of business.

Advantages

You can form a single-member limited liability company.

You can have a complete business as a member of an LLC.

LLC owners are protected from liabilities.

company commercials.

The operations of an LLC are managed by the members.

administrators. Since there is no board of directors, there are no requirements for

the celebration of regular board meetings.

Requires very little accounting; The financial and administrative requirements

they are also simple.

Disadvantage

You must pay payroll tax on the company's profits.

An LLC is like a business partnership; it cannot derive benefits from

incentive actions.

Since LLCs are governed by state law, different rules apply in

different states.
 The tax treatment also varies by state. Explain the financial goal.

the main thing that leaders of companies have.

Financial goals are the personal and general objectives you set regarding how you will save.

and will spend money. They can be things you expect to achieve in the short term or in the future. In fact, a

Sometimes it is simpler to achieve your goals if identified in advance. A financial goal

it is a goal that one should aspire to when managing their money. It may involve saving, spending, earning or

even investing. Creating a list of financial goals is vital for setting a budget. The

The main goal must be to create value for investors. Create value for investors.

it means generating high and consistent returns on your capital. This generally requires

both strong revenue growth and attractive profit margins.

According to Griffin (2019), he presents an illustration where the upper box indicates that the acts

managerial, combined with the economy, taxes, and political conditions, influence

the level and risk of a company's future cash flows, which ultimately

determine the price of its shares. The intrinsic value of a company (or any

investment guarantee) is the present value of all expected future cash flows

Cash flow statement (also known as statement of cash flows)

cash) is one of the three key financial statements that report cash, discounted to

corresponding discount.

A strong and effective corporate governance helps to cultivate a business culture of integrity.

that leads to positive performance and a sustainable business in general. Basically, there exists

to increase the accountability of all individuals and teams within their company,

working to prevent errors before they can occur. When a company has a

solid corporate governance indicates to the market that the organization is well managed and
that the interests of the administration are aligned with external stakeholders

(Williams, 2013). As a result, it can provide your company with a strong advantage.

competitive. Effective executive compensation plans motivate managers to

act in the interest of shareholders. Some motivational tools include 1) packages

of reasonable compensations, 2) the dismissal of managers who do not perform well

satisfactory, and 3) the threat of hostile takeovers (Griffin, 2019).

References
Brigham, E. F., & Houston, J. F. (2020). Fundamentals of Financial Management (E. C.
González Market, Trans.; 15th ed.). Cengage Learning. Cengage.
[Link]
Chapter 1: A panoramic view of financial management