Forms of Business Organizations Sole Proprietorship Simplest form

Forms of Business Organizations

Sole Proprietorship • • • Simplest form of business ownership Most flexible and easy to start Most common form of business Owned by only 1 person Owner has unlimited responsibility for all debts and liabilities • Personal property is at risk

Partnership • Owned by 2 or more individuals • Profits, losses, and debts are shared by the partners • Each partner is responsible for the other’s actions • Assume full personal liability

Limited Partnership • At least one partner assumes unlimited liability • The other partners are only liable for the amount they have invested in the business

Franchise • Purchase an already established business name and operation • Gives you the right to use an established trade name and logo • Can be very expensive • Must pay parent company portion of your sales

Corporations • Considered an infinite legal entity (an artificial human) • Have continual existence • Limited liability – The corporation is liable for all debt, not the people who run it • Sell stock and may pay dividends

Types of Corporations Public Corporation • Established for a governmental purpose • Stock owned by one or a small number of shareholders • Example: – Incorporated Cities – State hospitals – State universities Private Corporation • Established by private citizens for business or charitable organization • Stocks owned by a large amount of shareholders • Example: – Southwest Airlines – Walmart

Types of Corporations For-Profit • Private corporation organized to make a profit • Must pay taxes on earnings Nonprofit • Organized for social, charitable, or educational purposes • Can not distribute dividends • Do not pay taxes

Requirements to Become Incorporated • File Article of Incorporation – Outline policy for disillusion – Issue a prospectus (state purpose of corporation) – States types of stock to be sold – Names all parties involved and their positions

Types of Stocks Preferred Stock • Shareholders do not have voting power • Legally entitled to a stated dividend before other shareholders Common Stock • Basic type of stock • Shareholders have voting power • Last people to get paid dividends