CONTEMPORARY ECONOMICS© Thomson South-Western 8.2Sole Proprietorships and Partnerships  Describe the advantages and disadvantages of sole proprietorships.  Describe the advantages and disadvantages of partnerships. Objectives

CONTEMPORARY ECONOMICS© Thomson South-Western 8.2Sole Proprietorships and Partnerships  sole proprietorship  liability  partnership  general partnership  limited partnership Key Terms

CONTEMPORARY ECONOMICS© Thomson South-Western 8.2 Sole Proprietorships and Partnerships SLIDE 3 Sole Proprietorship Sole proprietorship is the simplest form of business organization; a firm that is owned and managed by one person, but sometimes hires workers.

CONTEMPORARY ECONOMICS© Thomson South-Western 8.2 Sole Proprietorships and Partnerships SLIDE 4 Who Is a Sole Proprietor? About three quarters of all businesses in the United States are owned by sole proprietors. Nearly all sole proprietorships are small.

CONTEMPORARY ECONOMICS© Thomson South-Western 8.2 Sole Proprietorships and Partnerships SLIDE 5 Distribution of Sole Proprietorships Based on Annual Sales and by Industry Figure 8.2

CONTEMPORARY ECONOMICS© Thomson South-Western 8.2 Sole Proprietorships and Partnerships SLIDE 6 Advantages of Sole Proprietorships Easy to start Few government regulations Complete control Owner keeps all profit Lower taxes Pride of ownership

CONTEMPORARY ECONOMICS© Thomson South-Western 8.2 Sole Proprietorships and Partnerships SLIDE 7 Disadvantages of Sole Proprietorships Unlimited personal liability Difficulty raising financial capital Limited life Difficulty finding and keeping good workers Broad responsibility

CONTEMPORARY ECONOMICS© Thomson South-Western 8.2 Sole Proprietorships and Partnerships SLIDE 8 Partnerships A partnership involves two or more individuals who agree to contribute resources to the business in return for a share of the profit.

CONTEMPORARY ECONOMICS© Thomson South-Western 8.2 Sole Proprietorships and Partnerships SLIDE 9 Types of Partnerships General partnership—partners share both in the responsibility for running the business and in any liability from its operation Limited partnership—at least one partner is required to be a general partner

CONTEMPORARY ECONOMICS© Thomson South-Western 8.2 Sole Proprietorships and Partnerships SLIDE 10 Distribution of Partnerships Based on Annual Sales and Industry Figure 8.3

CONTEMPORARY ECONOMICS© Thomson South-Western 8.2 Sole Proprietorships and Partnerships SLIDE 11 Advantages of Partnerships Easy to start Few government regulations Shared decision making and increased specialization Greater ability to raise financial capital More able to attract and retain workers Lower taxes

CONTEMPORARY ECONOMICS© Thomson South-Western 8.2 Sole Proprietorships and Partnerships SLIDE 12 Disadvantages of Partnerships Unlimited personal liability Limited life of the business Partners may disagree Profits must be shared