Business Organizations Unit 3 Microeconomics Types of Businesses

Business Organizations Unit 3: Microeconomics

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