Business Organizations Unit 3: Microeconomics

Types of Businesses Sole Proprietorship Partnership Corporation

Sole Proprietorships Sole proprietorship: A business owned and run by one person Easy to start Just need to pay business licenses and fees Ex: Opening up your own restaurant

Sole Proprietorship: Advantages Easy to start and manage Easy to leave business Don’t have to share profits No separate taxes Personal satisfaction

Sole Proprietorship: Disadvantages Unlimited liability Hard to get funding Difficult to be efficient and profitable Hard to find talented employees Limited lifetime of business

Partnerships

Partnerships Partnership: A business jointly owned by two or more persons Types of partnerships General partnership Limited partnership Easy to start Partners decide how to divide losses and profits

Partnerships: Advantages Easy to start Partners bring in different skills No separate taxes Easier to get funding/ loans Easier to be run efficiently

Partnerships: Disadvantages Responsible for all partners’ actions Conflicts between partners Liability if company fails Limited life of business

Corporations

Corporations Corporation: A business organization recognized by law as a separate entity having the rights of an individual To form a corporation: Government Charter Stocks Investors

Corporations: Advantages Easier to get a loan Professional managers can run it Limited liability for owner(s) Unlimited life of the business

Corporations: Disadvantages Hard to get charter Owners don’t have full control on day-to- day operations Double taxation Government regulations

Business Growth & Expansion Reinvestment Growth Through Mergers Types of Mergers: Horizontal mergers Vertical mergers Conglomerates Multinational

Horizontal Mergers Two or more businesses that produce the same kind of product join together

Vertical Mergers When businesses involved in different steps of manufacturing or marketing join together

Conglomerates A business that has at least four businesses all making different products

Multinational A corporation that has manufacturing or service operations in a number of different countries