1. Business Organization
Section 4.2
Business Organization

2. Objectives Describe the three basic forms of business ownership.
Explain alternative ways a business can be organized.

3. Key Terms proprietorship liability partnership partnership agreement
corporation
stock
dividend
board of directors
limited liability company (LLC)
cooperative

4. Essential Question
How do business owners choose a form of ownership?

5. Forms of Business Ownership
Private businesses can be structured in different ways:
Proprietorship
Partnership
Corporation

6. Forms of Business Ownership
Proprietorship is a business that is owned and often operated by a single individual
Doing business as (DBA) license if using a name other than the owner’s name
Fictitious name registration

7. Forms of Business Ownership
Advantages of proprietorships:
Easy to start
Easy to close
Retain all profits
Complete control of operations
Simple tax structure
Disadvantages of proprietorships:
Unlimited liability, or legal responsibility
Limited expertise
Limited life of business

8. Forms of Business Ownership
Partnership is an association of two or more persons who co-own a business with the objective of earning a profit
General partnership is co-owned by two or more general partners
Limited partnership is co-owned by at least one general partner and one or more limited partners
Partnership agreement is a written contract that establishes a partnership
Also called articles of partnership

9. Forms of Business Ownership
Advantages of partnerships
Easy to start
Combined financial resources
Skills and resources
Simple tax structure
Disadvantages of partnerships
Unlimited liability
Limited life
Potential disagreements

10. Forms of Business Ownership
Corporation is a business that is legally separate from its owners
Only exists on paper, but can act on its own behalf
Must file articles of incorporation to form
Founders create corporate bylaws to explain practices and procedures

11. Forms of Business Ownership
Stock is a share of ownership in a corporation
Dividend is a portion of the corporation’s earnings distributed to stockholders
Stockholders are the owners of the corporation
Board of directors is a group of individuals who make high-level management decisions for the business and establish company policies

12. Forms of Business Ownership

13. Forms of Business Ownership
Advantages of corporations
Limited liability
Ability to raise capital
Continued life
Transferring ownership
Professional management
Disadvantages of corporations
Expensive to form
Many governmental regulations
Double taxation

14. Forms of Business Ownership

15. Alternative Forms of Ownership
S corporation provides limited liability to its owners, but is taxed as a partnership
100 shareholders who are US citizens or residents
Limited liability company (LLC) combines the benefits of a corporation with those of proprietorships and partnerships
Profit taxed to unlimited number of owners
Cooperative (co-op) is owned and operated by those using its services
Requires full participation of members to operate

16. Alternative Forms of Ownership