Ownership interest
Ownership interest is viewed as equivalent of stock in companies such as corporation. Membership interest grant a member to attain participation in shares which is profit as well as loss of the company. It can also mean that member has a right to vote or obtain distributions from the corporation (S.E Friedman 1996, 24). Ownership (F. Bellandi 2012,32):
- can be an outcome of distribution to owners and contribution from owners, it focuses on changes in equity,
- arise only in case of transaction with the enterprise or among owners, any other sort of transaction that does not include enterprise or owners can not be considered as a change in ownership interest equity,
- typically is called as a bundle of rights, which owner obtain after contributing to enterprise.
Ownership allocation
In enterprises allocation of voting rights usually states one vote per one share. That way amount of votes is divided according to amount of shares. Many cooperatives per contra customize the rule to one member - one vote, without consideration of the members’ individual patronage. Only in twentieth century practice of one share - one vote became nearly universal meanwhile some statues of governing cooperatives still insist one member - one vote rule. However this rule is not universal and many cooperatives pursue one vote - one share rule. Additional members of the company can be accepted only with the agreement of all members (H. Hansmann 2009, 15).
Supplying capital to the firm in only one of many ways of forming relationship to which ownership can be tied. Ownership does not always attach to investment of capital. Contrary to popular perceptions, ownership might not have nothing to do with ownership of capital. Although this point of view can be argued and in fact there are examples when it's not true such as renting the land instead of owning it (H. Hansmann 2009, 16).
Present technology solutions and techniques allows to allocate ownership interest for a business, where all types of transactions of contributors are grouped into classes. Values of contributions are calculated in each class which further indicate value of contribution to the business.Records of ownership interest of each member is maintained in company's books and is known as member's Accumulated Adjustments Account. There's a significant difference of ownership interest between limited liability companies and corporations. LLC (Limited Liability Company) is a business entity type where the legal protection of a corporation and tax management of a partnership is combined. LLC owners, known as members contribute to a company and based on equity of their contribution percentage of their interest is counted. Ownership interest of each member can be determined at any time by the ratio of aggregate capital contributed to the aggregate capital contributions of all members (B. Johnson 2001, 1).
Interest in three economics schools
All three economics school mention the notion about the rate of interest being a result from a loss of an immaterial yield.
- Classical economies describe this kind of the rate of interest as compensates for a sacrificed profit opportunity including risk of investment. Interest arises when entrepreneur borrows money from "money capitalist". Money capitalist does not take the same risk as the first one when he uses the borrowed money. Interest rate is a difference between the available profit yield and the risk premium of the entrepreneur.
- Neoclassical economics describes the rate of interest as compensate for sacrifice of the consumption of goods because their premium is higher than goods consumed in future.
- In Keynesian financial aspects, the rate of premium adjusts for a penance of the liquidity premium yielded by cash since it can sell commitments whenever (G. Heinsohn, O. Steiger 2013, 53).
| Ownership interest — recommended articles |
| Appraisal right — Entity theory — Equity instrument — Shareholder loan — External sources of finance — Dissenters right — Issued share capital — Phantom Income — Adjusted present value |
References
- Bellandi F. (2012), Dual Reporting for Equity and Other Comprehensive Income under IFRSs and U.S. GAAP, John Wiley & Sons Ltd, Chichester, 32
- Friedman S.E.(1996), How to Profit by Forming Your Own Limited Liability Company , Dearborn Trade Publishing, 24-35
- Hansmann H. (2009), The Ownership of Enterprise, The Balknap Press of Harvard University Press, London, 15-16
- Heinsohn G., Steiger O. (2013), How to Profit by Forming Your Own Limited Liability Company , Routledge, New York, 53-66
- Johnson B. (2001), Dynamic determination of ownership interestbased on contribution, Stanford, 1
Author: Jolanta Jańczy
