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What is the “ownership structure” for a business entity?
Ownership structure concerns the internal organization of a business entity and the rights and duties of the individuals holding a legal or equitable interest in that business. As owner of the business entity, it is important to understand how the ownership structure of a particular business entity is organized and what that means for the owner’s rights.
- Example: A shareholder, as owner of a corporation, has certain rights. These rights are distinct from those of members of a limited liability company. Further, within the corporation, a holder of preferred stock may have different rights than the holder of common stock.
Discussion: Why do you think different types of business entity allow for unique ownership structures? Why do you think ownership structure is so important for business owners?
Practice Question: Can you think of any situation where ownership of the business entity became an issue between the founders or co-owners of the businesses? What was the basis of the dispute and what was the outcome?
- A good example is the dispute over ownership interest in Facebook, Inc., by the Winklevoss brothers. The genesis of the dispute is that their interest in the business was not compensated when they left the business early in its existence.