1. Chapter 8 B USINESS O RGANIZATIONS

2. S OLE P ROPRIETORSHIPS  A business organization is an establishment formed to carry on commercial enterprise.  A sole proprietorship is a business owned and managed by a single individual.

3. S OLE P ROPRIETORSHIP  70% of all businesses in the U.S. are sole proprietorships, but they account for only 4% of all U.S. sales.

4. A DVANTAGES OF S OLE P ROPRIETORSHIP  Easy to start up  Must meet some minimum requirements; 1. Authorization: a business license which is an authorization to start a business issued by the local government. 2. Site permit: a certificate of occupancy if not working out of home. 3. Name: must register a business name.

5. A DVANTAGES OF S OLE P ROPRIETORSHIP  Relatively few regulations, it is the least regulated form of business organization.  Zoning laws are laws in a city or town that designates separate areas for residency and for business.

6. A DVANTAGES OF S OLE P ROPRIETORSHIP  Sole Receiver of Profit

7. A DVANTAGES OF S OLE P ROPRIETORSHIP  Full control  Easy to Discontinue

8. D ISADVANTAGES OF S OLE P ROPRIETORSHIP  Unlimited personal liability  Liability is the legally bound obligation to pay debts.  May even lose personal property to make up debts.

9. D ISADVANTAGES OF S OLE P ROPRIETORSHIP  Limited access to resources  Having to pay for everything out of your pocket limits you.  Hard to expand quickly.  Individual strengths and weaknesses.

10. D ISADVANTAGES OF S OLE P ROPRIETORSHIP  Lack of Permanence  Limited life to due the ownership by one person.  Hard to keep employees, no fringe benefits, which are payments other than wages or salaries. Health care, paid vacation, retirement.

11. P ARTNERSHIPS SECTION 2

12. P ARTNERSHIPS  A partnership is a business organization owned by two or more persons who agree on a specific division of responsibilities and profits.

13. T YPES OF P ARTNERSHIP  General Partnership: partnership in which partners share equally in both responsibility and liability.

14. T YPES OF P ARTNERSHIP  Limited Partnership: partnership in which only one partner is required to be a general partner, or the one who is liable for the company. The other partners only contribute money.

15. T YPES OF P ARTNERSHIP  Limited liability partnerships (LLP): partnership in which all partners are limited partners.  Partners are limited from personal liability in certain situations, such as another partner’s mistakes. Attorneys, doctors, dentist, and accountants.

16. A DVANTAGES OF P ARTNERSHIPS  Easy to start-up.  Law does not require written agreement, but most develop articles of partnership, which is simply a partnership agreement outlining how the business will run.

17. A DVANTAGES OF P ARTNERSHIPS  If no articles of partnership they use the Uniform Partnership Act (UPA), an act adopted by most states that gives common ownership interests, profit and loss sharing, and shared management responsibilities in a partnership.

18. A DVANTAGES OF P ARTNERSHIPS  Shared decision making and Specialization.

19. A DVANTAGES OF P ARTNERSHIPS  Larger pool of capital.

20. A DVANTAGES OF P ARTNERSHIPS  Taxes  Like sole proprietorships, partnerships are not subject to special taxes.

21. D ISADVANTAGES OF P ARTNERSHIPS  Many of the disadvantages of sole proprietorship also apply to partnerships.  Unlimited liability, unless it is LLP.  General partner can lose everything.

22. D ISADVANTAGES OF P ARTNERSHIPS  Not complete control, must choose partners carefully.

23. D ISADVANTAGES OF P ARTNERSHIPS  Potential for conflict