Business Organizations By Mr Mumbrue Sole Proprietorship Single

Business Organizations By Mr. Mumbrue

Sole Proprietorship �Single owner �Sole prop makes up 70% of businesses, but do only 4% of the business (revenue) �Examples include Chuck’s Barbershop, Tim’s Bike Shop, local party stores, often lawn businesses, and hair salons.

A few local examples

Sole Prop Continued Advantages disadvantages �Ease of start-up (simple �Unlimited Liability business license) �Single taxation �Owner has complete control �Difficult to get loans/funding for expansion (slow growth) �Longevity/permanence most likely to be a problem in this business organization �Complete responsibility

Partnership �Two or more owners �Partnerships make up 9% of the businesses but do 12% of the business (revenue) �Doctors, Dentists, Lawyers often are partnerships. Can be restaurants, retail, or salons as well

Sam Bernstein Law Firm

Types of Partnerships �General Partnership-All partners have unlimited liability. �Limited Partnership-One partner has unlimited liability and the other has limited liability (silent partner) �Limited Liability Partnership-All partners have limited liability. (Doctors sharing office expenses)

Partnership Advantage Disadvantage �Relatively easy to start �Liability (depending on �More sources of money for growth (more people to get loans, etc. ) �Shared Responsibility �Still single taxation partnership type) �Potential for conflict with partner �Longevity/permanence still an issue �Growth still difficult

Corporation �Legal entity owned by it’s shareholders �Corporations are 20% of businesses but are doing 80% of the business �If you can buy stock in it, it is a corporation �Examples: GM, GE, Wal-Mart, Disney, and Arcelor. Mittal (GRRRRRR)

Corporations Advantage Disadvantage �Limited Liability-only �Difficult to set up (need lose the value of the stock you own �Can raise huge amounts of money from stocks and bonds �Longevity/permanence, death does not matter, just sell the stock. Easy transfer of ownership a lawyer) �Double taxation: Corporate income tax and taxes on dividends �Many government rules on operations/disclosure �May lose control of company by selling stock

Franchise �A semi-independent business that pays fees to a parent company in return for the exclusive right to sell a certain product or service in a given area �Individual Franchisee is often a sole proprietorship (unlimited liability) where the parent company/franchiser is usually a corporation (limited liability) �Growth is high for parent company, but limited for franchisee

Franchise

Franchise Advantage Disadvantage �Name recognition �High start-up costs �Training/help starting �Rules set by parent the business �Monopoly in the area �Easier expansion for parent company �Advertising done by parent company so not much control by local franchisee �Royalties and buy materials from parent company

Nonprofit �An institution that functions much like a business, but does not operate for the purpose of generating profit �Basically any charity you can think of �Provides a service to community

Nonprofit

De. Young Family Zoo (Ok, this is not a picture from there)

Nonprofit advantage disadvantage �Provides service to �Difficult to set up. Large community �No taxation (property, sales, or income) �May get volunteers �Growth depends upon the issue of the group �Limited liability amounts of paperwork to get tax exempt status �May have trouble getting highly qualified people (no stocks or profits)

Cooperative �A business organization owned and operated by a group of individuals for their shared benefits �Often small scale since it benefits the owners only �Farmers , health care, insurance, credit unions can be cooperatives

Cooperative

Cooperative Advantage disadvantage �Often easy to start �No real glaring �Benefits for the members �Members may do work for the organization to receive benefit (instead of money) disadvantage �Not likely to get real large since it benefits the members only. Who has incentive to make it big?