1. Business Organizations
Chevalier
Spring 2015

2. Sole Proprietorships A business owned and run by one person
Most numerous and profitable of three business types we’ll be talking about
Smallest in size; earn about 1/6 of the net income earned by all businesses

3. Sole Proprietorships Almost no start-up costs except for a license
Can be ran out of your house, over the internet, or from an office

4. Sole Proprietorship Advantages Disadvantages Ease of start up
Ease of management
Don’t have to share profits
No separate business income taxes
Psychological satisfaction
Ease of getting out of business
Owner has UNLIMITED LIABILITY
Difficulty in raising financial capital (debt, loans)
Size and efficiency (employees and inventory vs. limited capital)
Limited managerial experience
Difficulty of attracting qualified employees
LIMITED LIFE

5. Partnership A business jointly owned by two or more persons
Least numerous in terms of numbers of firms
General partnership vs. limited partnership (active in daily running)

6. Partnership Relatively easy to start Lawyers have to get involved
Profits
Debts
Death of one partner
End of partnership

7. Partnerships Advantages Disadvantages Ease of establishment
Ease of management (different talents)
Lack of special taxes
Easier to attract financial capital because of size)
Larger size
Easier to attract talented employees (offer specialized services)
Each partner is fully responsible for acts of all partners
Limited partners only lose initial investment; rest of outstanding debt falls to other owner(s)
Potential conflict between partners

8. Corporations Very formal and legal arrangement
People who want to incorporate must ask permission from the government.
If approved, a CHARTER is granted
Gov’t. document granting permission
Specifies number of shares of stock that can be sold
Sold to stockholders, or shareholders, can lead to dividends

9. Corporations Advantages Disadvantages
Ease of raising financial capital (sell stock, bonds (principal and interest))
Directors of a corp. can hire managers to run the firm
Limited liability to owners
Unlimited life
Ownership can change easily
Difficulty and expense of getting a charter
Owners have little say after they have voted for board of directors
Must keep detailed records/treated as a person; a separate entity
Heavy government regulation