Business Organizations Chapter 3 Section 1 Chapter 3 Section 1

Sole Proprietorship  Business owned & run by a single individual.  They have the smallest fraction of total sales.  Easiest form of business to start because it requires little except licenses & fees.  Business owned & run by a single individual.  They have the smallest fraction of total sales.  Easiest form of business to start because it requires little except licenses & fees.

Cont.  Management is simple, no decisions require approval from ‘higher up’.  Owner keeps all profits & also excepts all losses.  Does not have to pay separate business income tax. Must still pay individual income tax on profits.  Advantage of being own boss.  Easy to get out of business(pay any outstanding bills)  Management is simple, no decisions require approval from ‘higher up’.  Owner keeps all profits & also excepts all losses.  Does not have to pay separate business income tax. Must still pay individual income tax on profits.  Advantage of being own boss.  Easy to get out of business(pay any outstanding bills)

Still Cont.  Disadvantage is that the owner has unlimited liability; the owner is responsible for all losses a debts.  Another is that it is difficult to raise financial capital.  Usually carry minimal inventory & staff.  Owner usually has minimal management experience.  Disadvantage is that the owner has unlimited liability; the owner is responsible for all losses a debts.  Another is that it is difficult to raise financial capital.  Usually carry minimal inventory & staff.  Owner usually has minimal management experience.

Still Still Cont.  Because business is small, hard to find qualified employees.  ‘Limited Life’, Ceases to exist when owner dies, quits, or sells.  Because business is small, hard to find qualified employees.  ‘Limited Life’, Ceases to exist when owner dies, quits, or sells.

Partnership  Business owned by 2 or more partners.  General Partnership: all are responsible for management & financial obligations.  Limited Partnership: at least 1 partner is not active in daily activities  How do you form a Partnership? What are the Advantages & Disadvantages? Pg. 65  Business owned by 2 or more partners.  General Partnership: all are responsible for management & financial obligations.  Limited Partnership: at least 1 partner is not active in daily activities  How do you form a Partnership? What are the Advantages & Disadvantages? Pg. 65

Corporations  1/5 of businesses in U.S.  They do majority of sales.  Right to buy & sell property, enter legal contract, sue & be sued.  Must file for permission to incorporate w/ federal & state Gov’t. A ‘Charter’ is given which gives permission to create a corp.  1/5 of businesses in U.S.  They do majority of sales.  Right to buy & sell property, enter legal contract, sue & be sued.  Must file for permission to incorporate w/ federal & state Gov’t. A ‘Charter’ is given which gives permission to create a corp.

Cont.  What is STOCK?  What is a STOCK or SHAREHOLDER?  Money gained from stock sets up the Corp.  What is a DIVIDEND?  What is COMMON STOCK?  What is PREFERRED STOCK  What is STOCK?  What is a STOCK or SHAREHOLDER?  Money gained from stock sets up the Corp.  What is a DIVIDEND?  What is COMMON STOCK?  What is PREFERRED STOCK

Still Cont.  What are the Advantages & Disadvantages?  Bonds- Written promise to repay borrowed amount.  Amount borrowed is called Principal.  What is Interest?  What is Double Taxation?  What are the Advantages & Disadvantages?  Bonds- Written promise to repay borrowed amount.  Amount borrowed is called Principal.  What is Interest?  What is Double Taxation?

The End!!!