Business Organizations 1 Sole Proprietorship 2 Partnership 3

Business Organizations 1. Sole Proprietorship 2. Partnership 3. Corporation

1. Sole proprietorship-- a business owned and operated by one person.

Advantages: -easy to establish -owner has direct control -owner gets all profit -freedom -personal satisfaction -easy to get out -no special taxes

Disadvantages -owner has unlimited liability -difficult to raise financial capital -business must be certain size -requires “business sense” -difficult finding skilled workers

2. Partnership-- business run by 2 or more.

Advantages -easy to establish -no special taxes -easier to attract financial capital -efficiency easier (it’s larger) -easier to attract skilled workers

Disadvantages -Unlimited liability -All partners share profits -Limited life-- firm legally stops if partner quits, dies, or new one is added.

3. Corporations--form of business that is recognized as a separate and legal entity.

How to Start a Corporation 1. Get permission from state where headquarters will be. 2. Pay for and obtain charter. 3. Sell stock to shareholders.

Advantages -easy to raise money -can hire best talent -limited liability--shareholders only lose profits. -unlimited life--continues to exist even when ownership changes.

Disadvantages -difficult and expensive to get a charter -owners and shareholders have little say in business. -has to pay business income tax. -more gov’t regulations

Two truths and a lie: 1. Corporations raise more money than other businesses by selling stock. 2. Sole Proprietorships and Partnerships seem to have more in common with one another than with corporations. 3. All business organizations are seen as individuals to ensure limited liability to the owners.