1. Business Organization
Ch 3 Notes

2. Types of Organizations
Sole-Proprietorships Partnerships Corporations Franchise

3. Sole Proprietorship Owned and run by a single individual
Most numerous, and make the most money, but usually the smallest in size.
Only requirement is occasional business license and fees.

4. Advantages: Disadvantages: Easy to start and end.
Easy management
Do not share profits with co-owners, etc…
Psychological satisfaction and not taxed
Disadvantages:
Unlimited liability (all losses and debts are yours)
Hard to get capital
Employees
Limited life When the owner dies, so does the business

5. Partnerships Owned by two or more people.
Least numerous form of business
Must have articles of partnership drawn up.
Usually state how money is divided up

6. Types of Partnerships Limited General
At least one partner is not actively running the business
Financial
General
All partners are responsible for running the business

7. Advantages
Easy to start
Easy management
No special taxes
Easier access to capital
More efficient than S.P.
Employees easier to get
Disadvantages:
Responsible to other partners
Limited =limited liability
Limited Life
Potential conflict

8. Corporations Organization with the same rights as an individual
Can buy or sell property, sue or be sued, sign contracts etc…
Formal legal arrangement

9. Forming a Corporation Must incorporate
Get government permission and obtain a charter from National or state government
Specify # of shares to be sold to investors (stockholders)
Money used to set up the Corp.
May later issue dividends

10. Types of Stocks
Common Stock: Basic ownership (one vote per share of stock)
Vote to elect board, who hires management
Preferred Stock: Non-voting ownership
Get their dividends first

11. Advantages: Disadvantages: Easy to raise capital (sell stock or bonds)
Do not need to know a lot to run it
Limited liability
Unlimited Life
Easy to find new buyer
Disadvantages:
Hard to get a charter ($)
Almost no say in business if a normal shareholder
Double Taxation
A lot of government regulation

12. Franchise Info
chise.html