MBA Boot Camp: Forms of Ownership & Market Structures (1.3)
Week 1, Day 3
Concepts & Vocabulary
Liability: The legal and financial responsibility for a business's debts and actions. Limited liability means your personal assets (your house, your savings) are protected if the business goes bankrupt or is sued.
Equity: Ownership in a company. When you "give up equity," you are giving someone a percentage of ownership in exchange for capital (money) or services.
Monopoly vs. Perfect Competition: The two extremes of market structure. A monopoly is one seller dominating the market (e.g., your local water company). Perfect competition is many sellers offering identical products (e.g., farmers selling apples).
Core Lesson: How Businesses are Structured
When a business is born, it must choose a legal structure. This impacts taxes, liability, and how they raise money:
Sole Proprietorship & Partnership: Easy to start, but the owners have unlimited personal liability. If the business is sued, the owner's personal bank account is at risk. (e.g. photographers, graphic designers, tutors, house cleaners, food stands, e-commerce sellers on Etsy)
LLC (Limited Liability Company): A hybrid. It protects the owner's personal assets (like a corporation) but is taxed simply (like a partnership).
C-Corporation: A completely separate legal entity. It can issue shares of stock to raise money, making it the standard for large public companies. However, it faces "double taxation" (the company is taxed on profits, and then shareholders are taxed on dividends).
Market Structure Context: The structure a business chooses often correlates with its market. A local graphic design freelancer (Perfect Competition) will likely be a Sole Proprietor or LLC. A massive tech company aiming to dominate a market and become a near-Monopoly will be a C-Corporation because they need to issue equity to raise millions of dollars.
