Forms of Business Organizations

Sole Proprietorship Simplest form of business ownership Most flexible and easy to start Most common form of business Owned by only 1 person Owner has unlimited responsibility for all debts and liabilities Personal property is at risk

Partnership Owned by 2 or more individuals Profits, losses, and debts are shared by the partners Each partner is responsible for the other’s actions Assume full personal liability

Limited Partnership At least one partner assumes unlimited liability The other partners are only liable for the amount they have invested in the business

Franchise Purchase an already established business name and operation Gives you the right to use an established trade name and logo Can be very expensive Must pay parent company portion of your sales

Corporations Considered an infinite legal entity (an artificial human) Have continual existence Limited liability The corporation is liable for all debt, not the people who run it Sell stock and may pay dividends

Types of Corporations Public Corporation Established for a governmental purpose Stock owned by one or a small number of shareholders Example: Incorporated Cities State hospitals State universities Private Corporation Established by private citizens for business or charitable organization Stocks owned by a large amount of shareholders Example: Southwest Airlines Walmart

Types of Corporations For-Profit Private corporation organized to make a profit Must pay taxes on earnings Nonprofit Organized for social, charitable, or educational purposes Can not distribute dividends Do not pay taxes

Requirements to Become Incorporated File Article of Incorporation Outline policy for disillusion Issue a prospectus (state purpose of corporation) States types of stock to be sold Names all parties involved and their positions

Types of Stocks Preferred Stock Shareholders do not have voting power Legally entitled to a stated dividend before other shareholders Common Stock Basic type of stock Shareholders have voting power Last people to get paid dividends