Business Organization Ch 3 Notes

Types of Organizations Sole-Proprietorships Partnerships Corporations Franchise

Sole Proprietorship Owned and run by a single individual Most numerous, and make the most money, but usually the smallest in size. Only requirement is occasional business license and fees.

Advantages: Disadvantages: Easy to start and end. Easy management Do not share profits with co-owners, etc… Psychological satisfaction and not taxed Disadvantages: Unlimited liability (all losses and debts are yours) Hard to get capital Employees Limited life When the owner dies, so does the business

Partnerships Owned by two or more people. Least numerous form of business Must have articles of partnership drawn up. Usually state how money is divided up

Types of Partnerships Limited General At least one partner is not actively running the business Financial General All partners are responsible for running the business

Advantages Easy to start Easy management No special taxes Easier access to capital More efficient than S.P. Employees easier to get Disadvantages: Responsible to other partners Limited =limited liability Limited Life Potential conflict

Corporations Organization with the same rights as an individual Can buy or sell property, sue or be sued, sign contracts etc… Formal legal arrangement

Forming a Corporation Must incorporate Get government permission and obtain a charter from National or state government Specify # of shares to be sold to investors (stockholders) Money used to set up the Corp. May later issue dividends

Types of Stocks Common Stock: Basic ownership (one vote per share of stock) Vote to elect board, who hires management Preferred Stock: Non-voting ownership Get their dividends first

Advantages: Disadvantages: Easy to raise capital (sell stock or bonds) Do not need to know a lot to run it Limited liability Unlimited Life Easy to find new buyer Disadvantages: Hard to get a charter ($) Almost no say in business if a normal shareholder Double Taxation A lot of government regulation

Franchise Info http://www.aboutmcdonalds.com/mcd/franchising/us_franchising/acquiring_a_fran chise.html http://franchise.littlecaesars.com/WhyLittleCaesars/TheFinancialInvestment.aspx https://www.franchisehelp.com/franchises/jack-in-the-box/ https://www.franchisehelp.com/franchises/pizza-hut/