Business Organizations Unit 3 Businesses Types of Businesses
Business Organizations Unit 3: Businesses
Types of Businesses • Sole Proprietorship • Partnership • Corporation
Sole Proprietorships • Sole proprietorship: A business owned and run by one person • Easy to start • Just need to pay business licenses and fees • Ex: Opening up your own restaurant
Sole Proprietorship: Advantages • Easy to start and manage • Easy to leave business • Don’t have to share profits • No separate taxes • Personal satisfaction
Sole Proprietorship: Disadvantages • Unlimited liability • Hard to get funding • Difficult to be efficient and profitable • Hard to find talented employees • Limited lifetime of business
Partnerships
Partnerships • Partnership: A business jointly owned by two or more persons • Types of partnerships • General partnership • Limited partnership • Easy to start • Partners decide how to divide losses and profits
Partnerships: Advantages • Easy to start • Partners bring in different skills • No separate taxes • Easier to get funding/ loans • Easier to be run efficiently
Partnerships: Disadvantages • Responsible for all partners’ actions • Conflicts between partners • Liability if company fails • Limited life of business
Corporations
Corporations • Corporation: A business organization recognized by law as a separate entity having the rights of an individual • To form a corporation: • Government Charter • Stocks • Investors
Corporations: Advantages • Easier to get a loan • Professional managers can run it • Limited liability for owner(s) • Unlimited life of the business
Corporations: Disadvantages • Hard to get charter • Owners don’t have full control on day-today operations • Double taxation • Government regulations
Business Growth & Expansion • Reinvestment • Growth Through Mergers • Types of Mergers: • Horizontal mergers • Vertical mergers • Conglomerates • Multinational
Horizontal Mergers • Two or more businesses that produce the same kind of product join together
Vertical Mergers • When businesses involved in different steps of manufacturing or marketing join together
Conglomerates • A business that has at least four businesses all making different products
Multinational • A corporation that has manufacturing or service operations in a number of different countries
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