1. Business Organizations and Economic Institutions
Chapter 3

2. Sole Proprietorships Business owned and run by one person
Most common type of business
Smallest in size
Forming a Sole Proprietorship
Few regulations for starting

3. Sole Proprietorships Economic Strengths Started with ease
Managed with ease
Only one “boss”
Owner gets 100% of the profits
Do not pay business income taxes
Personal freedom
Ease of getting out of business

4. Sole Proprietorship Economic Weaknesses Owner has unlimited liability
Fully responsible
Difficulty raising financial capital
Hard to be big enough to run efficiently
Proprietor often has limited managerial experience
Difficult to attract qualified employees
Limited lifetime

5. Partnerships Business jointly owned by two or more persons
Types of Partnerships
General Partnership
All partners are responsible to the business
Limited Partnership
One partner is inactive in daily running of the business
Easy to start
Must draw up legal papers called articles of partnership
States how profits or losses will be divided

6. Partnerships Economic Strengths
Attract financial capital easier than proprietorship
Larger – runs more efficiently
Easier to attract top talent
Ease of establishment
Ease of management
Lack of special taxes

7. Partnerships Economic Weaknesses
Partners are responsible for the acts of the other partners
Limited partnership – limited partner is not held fully responsible
Limited life
Potential conflict between partners