1. Forms of Business Organization

2. Sole Proprietorships
A business that is owned and operated by a single individual
Sole proprietorships are ready for business as soon as they set up operations
The most common form of business organization in the US is a sole proprietorship

3. Sole Proprietorships Advantages Easiest form of business to start
Decisions do not require approval from ‘higher up’
Keep all profits
Does not pay separate business income taxes
Psychological factor of being own boss
Easy to get out of business

4. Sole Proprietorships Disadvantages Owner has unlimited liability
Difficult to raise capital
Size and efficiency
Cost of carrying minimum inventory
Often has limited managerial skills
Difficult to attract qualified employees
Larger employers can offer more

5. Partnership Business that is jointly owned by two or more persons
General Partnership – all partners are responsible for management and financial obligations
Limited Partnership – at least one partner is not active in the daily running of the business
Least numerous form of business in the US

6. Partnership Advantages Ease of startup
Formal legal papers called ‘articles of partnership’ are usually written
Ease of management/varied expertise
Lack of special taxes
Easier to attract capital investments than sole proprietorship
More efficient
Easier to find good employees

7. Partnership Disadvantages
In a general, each partner is responsible for acts of all partners
In a limited, if the limited partner loses their investment, the other partners must make up the loss
Potential for conflict between partners

8. Corporations
Form of business organization recognized by law as a separate legal entity with all the rights of an individual
Gives corporations the right to buy and sell property, enter into legal contracts, and to sue and be sued
Accounts for about one fifth of businesses, but is responsible for the majority of all sales

9. Corporations Forming a Corporation
Must file for permission with the national government
If approved, a charter is granted, which is a document giving permission to create a corporation
Charter specifies the number of shares of stock to be sold

10. Corporations Advantages Ease of raising money
Owners have limited liability
Directors can hire professional managers to run daily operations
Ease of transferring ownership

11. Corporations Disadvantages
Detailed records need to be kept for payment of taxes
Double taxation of corporate profits
Difficulty and expense to get a corporate charter
Owners or shareholders have little voice in business operations
Subject to more government regulations