1. BUSINESS ORGANIZATIONS

2. SOLE PROPRIETORSHIPS Characteristics
a business owned and run by one person
most common form of business organization in the US
usually the smallest in size of all types of businesses

3. SOLE PROPRIETORSHIPS CHARACTERISTICS
together only have a fraction of total sales of all businesses
often the most relatively profitable

4. SOLE PROPRIETORSHIPS FORMATION
easiest type of business to start due to lack of government involvement
Can start in front yard or on the Internet

5. SOLE PROPRIETORSHIPS ADVANTAGES
1. The ease with which it can be started (little Govt. involvement)
2. Relative ease in managing and flexibility
-one owner, one decision maker
3. Profits do not have to be shared with any other owners
-therefore more money for me

6. SOLE PROPRIETORSHIPS
4. No business income taxes have to be paid, not considered a separate legal entity
5. Owners feel a certain amount of personal freedom by being their own boss
6. The ease in getting out of business if the owner decides to do so

7. SOLE PROPRIETORSHIPS DISADVANTAGES
1.    Unlimited Liability – the owner is personally and fully responsible for all loses and debts of the company
2.    Difficulty in raising financial capital, one person has limited resources

8. SOLE PROPRIETORSHIP
3.  Size is typically small which does not lend itself to peak efficiency
- this goes back to availability of
financial resources
4. The proprietor often has limited managerial experience may be a great inventor but bad business person, also has to deal with sales, marketing, and accounting

9. SOLE PROPRIETORSHIP Difficulty in attracting qualified employees
need employees that can do several things with a smaller company
hard to compete with big firms offering better benefits
6. Limited Life – when the owner dies or quits, the entity ceases to exist

10. PARTNERSHIPS CHARACTERISTICS
a business jointly owned by two or more persons
together they represent about 7% of all business organization in US
again only a small fraction of total business sales and profit

11. TYPES OF PARTERNSHIPS TWO TYPES
general partnership – all the partners are responsible for the management and financial obligations of the business
most common form of partnership
limited partnership – at least one partner is not active in the daily running of the business

12. PARTNERSHIPS Formation Also relatively easy to start
Articles of partnership – formal legal papers – are drawn up to specify the arrangements between the partners:
a. how profits will be split up
how they can take on future partners
what will happen if the partnership ends, etc.

13. PARTNERSHIPS STRENGTHS
1.    Ease of establishment
2.    Ease of management – different partners may bring expertise in different areas of running a business – 2 heads are better than 1
3.    No special taxes on a partnership – taxed individually

14. PARTNERSHIPS (STRENGTHS)
4.    Easier to attract financial capital, more resources, easier to get bank loans due to size
5.    Larger size of the business makes reaching efficiency easier
6.    Many find it easier to attract top talent into their organization

15. PARTNERSHIPS (WEAKNESSES)
1.    In a general partnership, each partner is fully responsible for the actions of the other partners – including losses and debt
-Limited partnerships have limited liability – the partners liability for the partnerships losses and debts is only as big as their investment in the firm

16. PARTNERSHIPS (WEAKNESSES)
2.    Limited life – when a partner dies, quits or a new partner is added, the original partnership legally ceases to exist – arrangements can be made for the name of the firm to remain the same and such
3. Potential conflict between partners – you never know

17. CORPORATIONS Characteristics - a form of business organization
recognized by law as a separate legal entity having all the rights of an individual
- a very formal and legal arrangement
- about 90% of all business is done by corporations

18. CORPORATIONS FORMATION
Must file for permission from the federal or state government
A charter is granted if permission is given

19. CORPORATION FORMATION
-shares of stock (units of ownership) are sold to the investors in the company
– investors are called shareholders or stockholders
-the money from the sale of stock is used to set up the corporation
A person who buys stock in the company becomes part owner and has certain ownership rights – the extent depends on how much they own

20. TYPES OF STOCK
common stock – basic ownership in a corporation, with each share of stock representing one vote
votes are used to elect a board of directors
board directs the business by setting broad policies and goals and hires the professional management team to manage the company

21. TYPES OF STOCK preferred stock – non-voting ownership in a company
If company should go out of business:
dividends are received first by those who own preferred stock
investment in capital and other resources goes to common stock holders

22. CORPORATIONS STRENGTHS
1.    Ease of raising financial capital
-need more finances sell more stock, or sell bonds (loans)
2.    Directors can hire the best management available to run the firm
3.    Limited liability for owners – you only risk the amount of your investment

23. CORPORATION STRENGTHS
4. Unlimited life – if an owner (stockholder) in the company dies or sells his ownership, the firm continues on without him
5.    The ease of transferring ownership – just sell your stock to someone else and you are no longer an owner

24. CORPORATION WEAKNESSES
1.    Difficulty and expense in getting a charter (could be thousands of $)
2.    Once you vote for a Director, you as a shareholder don’t have much say in the operation of the firm

25. CORPORATION WEAKNESSES
Corporate taxes must be paid (higher than individual tax rates)
4.      Subject to more government
regulation than other forms of
business

26. Answer the following questions:
What problems would you expect to have if you were assigned to do a graded team project with one other student? Would there be more or fewer problems if additional students were assigned to each team? What if you were able to do it alone? Which would you prefer? Explain. How does this compare to advantages and disadvantages of various business organizations? Take 5 minutes to explain your answer.

27. Answer the following questions:
Identify a new product that you as an entrepreneur will create and think will definitely be a hit. Be creative not necessarily realistic! Which type of business organization would you use to create your product and why? Use the advantages and disadvantages discussed in class to defend/rationalize your decision. Minimum 5 sentences.