1. Business Organizations
Sole Proprietorships, Partnerships and Corporations

2. Legal Forms of Business
Sole Proprietorship
Partnerships
Corporations
Regular Corporation
General Partnership
Limited Partnership
Limited Liability Partnership
(LLP)
Sub-Chapter S Corporation
(S-Corporation)

3. Sole Proprietorship
Business owned (and usually operated) by one individual
Simplest form of business ownership
Most popular form in the U.S. – about 75% total
Most common in:
- retail
- service
- agriculture

4. Sole Proprietorship Advantages Disadvantages Ease of start-up
2. Pride of ownership
Retention of profits
Easy to discontinue
Unlimited Liability
Limited life: business ends when owner leaves or dies
Limited access to start-up capital and credit
Difficulty in hiring and keeping quality employees

5. Partnerships Two or more owners
Least numerous form – less than 8% of all businesses
Fall into three categories:
General
- most common
- partners share equally in responsibility and liability
2) Limited
- only one partner is required to be a general partner (control but liability)
Limited Liability
- all partners are limited partners

6. Partnerships Advantages Disadvantages Ease of start-up
Articles of partnership: document that lists
each partners rights & responsibilities
Greater access to capital & credit
Limited govt. regulation
Retention of profits
More management expertise
Shared profits
Unlimited liability for “general partners”
Limited life
- business ends when any partner dies or withdraws
4. Conflict between partners

7. For Review
1. What is the simplest and most common form of business ownership in the U.S.?
Answer: sole proprietorship
2. What are the advantages and disadvantages of a sole proprietorship?
3. What are the three categories of partnerships?
Answers: general, limited and limited liability
4. What are the advantages and disadvantages of a partnership?

8. Corporations
Defined as a legal entity, owned by individual stockholders, with each facing limited liability for the corporations debts
Most complex of all business organizations
- make up 20% of all U.S. businesses
- accounts for 87% of all U.S. business income
Owners are called “stockholders” or “shareholders”
Governed by a “Board of Directors”

9. Types of Corporations Closely held (or “privately held”) corporation
- only issue stock to a few people, usually family members
- rarely trade their stock, but pass down from generation-to- generation
Publicly held corporation
- many shareholders who can buy or sell stock

10. http://image. slidesharecdn

11. Corporations Advantages Disadvantages Limited liability
Ease of ownership transfer
Unlimited life
Greater access to capital
Specialized management expertise
Expense and difficulty of start-up
- requires a Corporate Charter
Double taxation
More government regulations
Less control

12. Corporate Charter Also called a “certificate of Incorporation”
Issued by the state where the corporation resides
What does it include?
Corporate name
Statement of purpose
Founder’s names and address
HQ business address
Method of fund-raising
Corporate rules

13. Answers to the following questions can be found beginning on p
Answers to the following questions can be found beginning on p.185 in your textbook.
1. What is a sole proprietorship?
2. Explain the characteristics of a partnership?
3. Do you think the advantages of partnerships outweigh the disadvantages? Why or why not?
4. How does a corporation differ from a sole proprietorship or partnership?
5. What is the difference between a closely held corporation and a publically held corporation?
6. Define the following terms: stock, bond and dividends.
7. Why must stockholders pay taxes on dividends?

14. Other Business Organizations
Franchise: semi-independent business that pays fees to a parent company
Business is granted the exclusive right to sell a certain product(s) or service in a given area

15. Franchise Advantages Disadvantages Management training & support
Standardized quality
National advertising program
Financial assistance
Centralized buying power
Fees and royalties
Strict operating standards
Purchasing restrictions
Limited product lines

16. Best Franchises to Own In 2016
Ranked by Entrepreneur Magazine
Jimmy Johns Sandwich Shop
Hampton Inn by Hilton
Supercuts
Servpro
Subway

17. Cooperative Organizations
Cooperative: business organization owned by a group of individuals for their shared benefit
Fall into three categories:
Consumer or purchasing
- Sam’s Club
Service
- Credit Unions
3. Producer
- agriculture

18. Nonprofit Organizations
Function like a business, but do not operate for the purpose of generating profit.
Benefit society
Exempt from Income taxes
Service related
Ex: YMCA, American Red Cross, churches, hospitals

19. Professional Organizations: work to improve the image, working conditions, and skill levels of people in certain occupations
NEA and AEA for teachers
ABA for lawyers
Business Associations: promote the collective interests of a similar group of businesses
BBB or Better Business Bureau
Chamber of Commerce
Trade Associations: organizations that promote the interests of particular Industries
Home Builders Association of Ala.
Ala. Retail Association