Business Organizations There are 3 major forms of business organizations, let’s look at each of them:

1. SOLE PROPRIETORSHIPS A SOLE PROPRIETORSHIP IS A BUSINESS OWNED AND OPERATED BY A SINGLE PERSON. THIS TYPE OF BUSINESS IS THE OLDEST, SIMPLEST, AND MOST COMMON.

CORPORATIONS SOLE PROPRIETORSHIPS

SOLE PROPRIETORSHIPS One reason that Sole Proprietorships are so popular is that they tend to be enterprises that require small amounts of financial capital, so they are easy to start.

SOLE PROPRIETORSHIPS Owner/Operator has full control, they make all of the decisions. The owner/operator keeps all of the profit. This leads to a higher level of personal satisfaction.

SOLE PROPRIETORSHIPS In a Sole Proprietorship liability is referred to as debt. Unlimited Liability-If a sole proprietorship accumulates a large amount of debt then it is left up to the individual person to pay off. Owner/operators run the risk of losing everything!! (homes, cars, savings)

SOLE PROPRIETORSHIPS Limited Life-The death of the owner often means the death of business. Others could carry on the business, but it must be reestablished in the new owner’s name.

SOLE PROPRIETORSHIPS Limited Growth Potential Business owners must put up collateral for a loan. Collateral is anything of value that the borrower agrees to give up if he or she is not able to repay the loan.

SOLE PROPRIETORSHIPS It can be difficult to recruit good employees to help grow your business. This can lead to burnout for the owner/operator.

2. Partnerships Partnerships are businesses owned by two or more people. Partnerships are the least common form of business.

CORPORATIONS SOLE PROPRIETORSHIPS

2. Partnerships Like sole proprietorships, partnerships generally require little start-up cost. Partnerships generally have more access to start-up money than sole proprietorships.

Partnerships Specialization Partners can split responsibilities and focus on skills that they are best suited. Salesman Accountant

Partnerships Shared Decision Making Partners may compare their points of view and arrive at decisions together. Each individual uses their strengths to improve the business

Partnerships Shared Business Losses Partnerships can generally weather financial storms more easily. Companies don’t entirely depend on one person’s financial strength.

Partnerships Unlimited Liability Each partner has a role in the business and is therefore each is responsible for all losses. Each partner could possibly lose personal property to cover losses.

Partnerships Potential for conflict Partners may have different visions or different management styles. Unreliable partners may fail to pull their own weight. Partners may be unable or unwilling to compromise.

Partnerships Lack of Longevity Illness or death-similar to sole proprietorships, partnerships may not survive the death of one of the owners.

Partnerships Division of Profits Unlike in a sole proprietorship, partners must share all of their profits

CORPORATIONS Corporations are businesses that are owned by their shareholders. They may have hundreds, even millions of owners. How does someone become a shareholder?

Corporations earn the greatest percentage of business profits in the U Corporations earn the greatest percentage of business profits in the U.S.

CORPORATIONS Corporations have access to money for expansion. Makes growth much more manageable. With so many owners, corporations are said to have unlimited life.

CORPORATIONS Corporations are often large and diverse and offer opportunities for advancement for employees. Limited Liability-Shareholders only risk losing the money they have invested in the company.

CORPORATIONS Double Taxation- The profits of corporations are taxed, then the dividends that shareholders receive are taxed again.

CORPORATIONS Possibility of losing control of the company. Corporations must deal with more government oversight and regulations.