1. ECONOMICS UNIT 3 – Types of Businesses
Ms. Staker

2. Sole Proprietorships
Sole Proprietorship – business owned and run by ONE PERSON.
S.P. can have many employees, but are still only owned by one person.

3. Sole Proprietorships STRENGTHS: Don’t have to share your profits
Don’t have to pay business taxes
You are your own boss!

4. Sole Proprietorships Weaknesses: Owner has unlimited liability
Difficult to raise $ to start a business
Limited life – when owner quits, firm is done
“Who’s gonna take care of all this money when I’m gone?”

5. LIABILITY
Limited Liability: You can only lose what you started out with ($)
Partnership, Corporation
Unlimited Liability: You are legally bound to pay debts of your business
Sole Proprietorship

6. LIFE
Limited Life: Once an owner quits, dies, etc., the business dies too
Sole Proprietorship, Partnership
Unlimited Life: The business goes on even if someone leaves.
Corporation

7. PARTNERSHIPS Partnership: business owned by 2 or more persons
General Partnership: all partners are responsible for keeping the business going; finances
Limited Partnership: At least one partner is not active in the daily running of the business.

8. Partnerships STRENGTHS: 1. Limited Liability 2. Different talents
3. Partnerships get money easier than sole proprietorships

9. PARTNERSHIPS WEAKNESSES:
Each partner is responsible for acts of all other partners.
Limited life
Potential conflict between partners

10. CORPORATIONS
Corporation: a big business recognized by law as having the same rights of an individual
To form a corporation – you must ask for permission from government
If approved, you receive a charter: gov’t document giving you permission to create your corporation

11. CORPORATIONS STRENGTHS 1. Easy to raise money – sell stock and bonds
Bonds: written promise by corp. to repay a person for an amount borrowed at a later date (plus interest)

12. CORPORATIONS
Corporations have stockholders / shareholders: investors in a corporation.
Stock: ownership of part of the business

13. CORPORATIONS STRENGTHS: (CON’T) 2. Can hire best management / talent
3. Limited liability for owners.
4. Unlimited life: business continues to exist even when ownership changes

14. 5. Easy to transfer ownership – can sell your stock, leave the business

15. CORPORATIONS WEAKNESSES: Difficult / expensive to get a charter
Shareholders have little say in how the business is run (Board of Directors)
Business must pay income taxes