BUSINESS ORGANIZATIONS

Business Organizations An enterprise that produces goods or provides services in order to make a profit A business can be organized in one of several ways, and the form its owners choose will affect the company's and owners' legal liability and income tax treatment. Types: Sole Proprietorship Partnership Corporation Non-profit

Sole Proprietorship Business owned and managed by one person Account for more than 70% of all businesses in the U.S. Generate less than 5% of all sales

Advantages of Sole Proprietorships Easy to open and close Requires money, license, permit, and registered name Few regulations Freedom and control 1 person makes the decisions Owner keeps profits

Disadvantages of Sole Proprietorships Limited funds/money Limited life Unlimited liability Owner is responsible for all financial aspects of the business

PARTNERSHIPS

Partnerships A business co-owned by 2 or more people who agree on how responsibilities, profits, and losses are divided

Types of Partnerships General partnership: partners share management of the business Each partner is liable for all business debts/losses Limited partnerships: partnership in which 1 person is not actively involved in the day-to-day running of the business This partner is only liable for what he/she has invested

Types of Partnerships (continued) Limited liability partnership (LLP): all partners are limited partners Not responsible for the debts and liabilities of the other partners Not all businesses can register as LLP’s LLP’s usually include medical partnerships, law firms, and accounting firms

Advantages of Partnerships Easy to open and close Few regulations Access to resources (money) Joint decision-making Specialization Each partner may bring specific skills to the business

Disadvantages of Partnerships Unlimited liability Partners are responsible for all of the business’s debt Limited life When a partner dies, retires, or leaves, the partnership ends Potential for conflict Caused by more than 1 person making decisions

Questions 1. Explain how a sole proprietorship rests on the principles of free enterprise. 2. If you were looking to form a partnership, what traits would you want in a partner? Name 5 traits (and no…good looking doesn’t count). 3. Ideally, would a major retail or manufacturing business work as a partnership? Explain why or why not. 4. Name 2 types of businesses that would thrive as sole proprietorships. 5. Name 2 types of businesses that would thrive as partnerships.