Types of Business Organization Sole Proprietorship q Proprietor

Types of Business Organization

Sole Proprietorship q Proprietor – owner of the business q One owner

Advantages q Keep the profits! q Quick decisions q Easy to obtain credit q Personal pride

Disadvantages q Complete Legal Responsibility q Losses are NOT shared (unlimited liability!) q Must make all decisions q Demanding and Time consuming q Might be forced to rely on personal funds q Business usually does not survive the owner

Partnership q Two or more individual owners.

Advantages q Losses are shared q Can divide workload q Can be more successful than a sole proprietorship

Disadvantages q Have to share profits q Unlimited Liability q Slower decision making q Not as easy to raise money q If a partner dies, then business ends or must be reorganized

Corporation q An organization owned by many people but seen by the government as if it were a person

Articles of Incorporation q Application with the state in which you will run your business q If granted by the state, a Corporate Charter (a license to operate from that state) is issued.

Stock q A piece of ownership in the company. q Sold by companies to raise money. q Stockholders make major decisions within the company.

Advantages q LIMITED LIABILITY q Stockholders do not need to devote time to running the company. q The people running the company are usually business professionals. q Easy to raise money – simply sell stock! q Unlimited Life.

Disadvantages q Decision making can be slow. q Taxes on Corporate Profits. q Individual stockholders have little or no say in how the company is run.

Profit Motive By Paul D. Mixon

Profit q - the extent to which a person or business is better off at the end of a period q - also can be defined as money made minus expenses. (Revenue – Costs)

Motive q - reason for doing something. q - also called incentive.

Profit Motive q Money is the incentive. q We want to make more money than we spend.

Example 1 An individual is working for $9 an hour. They are offered a job that pays $12 an hour. Do they take the new job? Why or why not?

Example 2 ACME Bread, Inc. can open up a new store in either Greenville or La. Grange. A new store in Greenville will make $37, 000 a year, while a new store in La. Grange will make $89, 000 a year. Which town should ACME choose to open a new store? Why is there no Mc. Donalds in Franklin?

Example 3 Jones Sheet Metal is thinking about adding two new employees at $11 an hour. What would Jones Sheet Metal need to know before they should make a decision?

The Consumer Q - How do consumers benefit from entrepreneurs focusing on making profits? A - Entrepreneurs will produce products that consumers want and sell at prices that consumers will pay. Also, producers will work to improve products to attract more consumers.

Questions?