1. Aim: What are the different ways businesses can be organized?
Think about: Would you want to be “your own boss?” Why or why not? (What are the pros and cons?)

2. Business Organizations
Business organizations are profit-seeking economic institution that serves as a link between scarce resources and consumer satisfactions.

3. Type 1: Sole Proprietorship
Sole Proprietorships are owned and run by one person
Generally small in size
Most common form of business organization in United States (72%).

4. Sole Proprietorship Strengths: Easily started/easy to end
Flexibility/easily managed
Don’t have to share profits
No separate business income taxes
Personal freedom & satisfaction

5. Sole Proprietorship Weaknesses:
Unlimited liability (responsible for losses & debts)
Difficulty raising financial capital
Limited experience of proprietor
Difficulty attracting qualified employees
Limited life

6. Type 2: Partnership
Partnerships are business jointly owned by 2 or more persons (10% of all businesses)
“Articles of partnership” explain how profits, losses, and property will be divided
Partnerships make up 8%
of the businesses in America

7. Partnership Strengths: Ease of establishment Ease of management
Lack of special taxes
Easier to attract financial capital
Greater efficiency
Easier to attract top talent

8. Partnership Weaknesses:
Partners responsible for acts of all other partners
Limited life (legally ceases to exist if partner dies, quits, etc.)
Potential conflict

9. Type 3: Corporation
Corporations are separate legal entity having all the rights of individuals
Can buy or sell property, enter into contracts, sue or be sued
People may buy stock and own a fractional share of the business
Corporations Make Up 20% of
businesses but Earn 62% of
revenues

10. Corporation Strengths: Ease of raising financial capital
Ability to hire best management
Limited liability
Unlimited life
Ease of transferring ownership

11. Corporation Weaknesses:
Difficulty and expense of getting a charter (govt. document that gives permission to incorporate)
Shareholders have little say in how business is run
Corporation must pay income taxes
Subject to more government regulation

12. Reinvesting Cash Flow
Owners/Board of Directors decides how money will be spent:
Paid back to owners for risk
Reinvested for renovations
Invested in Real Estate
Reinvested money in the firm increases profits.

13. Closing Questions
If you were planning to open a business, which form of organization would you prefer? Explain why???