1. Notebook # 8 Economics 3-1
Three Forms of
Business
Organization

2. Economics 2-3
Three Forms of
Business Organization
ESSENTIAL QUESTION:
What are the three forms of business organizations? How do they operate?

3. Economics 2-3 Three Forms of Business Organization GPS STANDARDS:
SSEMI4-
a.) Compare and contrast three forms of business
organization- sole proprietorship, partnership, and
corporation

4. Three Forms of Business Organization
There are three main forms of business organizations in the economy today:
sole proprietorship
the partnership
the corporation.
Each offers its owners significant advantages and disadvantages.

5. Outline- Economics 3-1
Three Forms of
Business
Organization p

6. Economics 2-3
Three Forms of Business Organization

7. Sole proprietorships
A sole proprietorship is a business run by one person. It is the smallest type of business organization in size, yet the most numerous and profitable.

8. Sole proprietorships The advantages to sole proprietorships are:
ease of start-up
ease of management
owner gets all the profits
business itself pays no income taxes
taxes only on the owner’s personal income
psychological satisfaction of owning one’s business
ease of closing the business

9. Sole proprietorships The disadvantages to sole proprietorships are:
the owner has unlimited liability
it is hard to raise financial capital
owner may not be able to hire enough personnel or stock enough inventory to operate efficiently
owner may have limited managerial experience
hard to attract qualified employees
business has limited life and legally stops existing when the owner dies or sell the business

10. Partnerships
A partnership is a business jointly owned by two or more persons. It is the least and has the second smallest proportion of sales and net income.

11. Partnerships
General partnerships are a type of business in which all partners are involved in the management and finances.
In a limited partnership, at least one partner is not involved in management.
This partner may have helped to finance the business.

12. Partnerships
Articles of the partnership document spell out how the partners divide up the profits or losses.

13. Partnerships The advantages of partnerships are: the ease of start-up;
ease of management;
no special taxes on a partnership;
easier to raise capital through bank loans or new partner;
larger size aids efficient operations;
easier to attract skilled employees.

14. Partnerships The disadvantages of partnerships are:
partners are responsible for the acts of each and every partner, except in a limited partnership where the limits are spelled out
limited life of partnerships ends if a partner leaves
potential for partner conflicts.

15. Corporations
A corporation is a business organization recognized by law as a separate legal entity with all the rights of an individual.
Corporations receive a charter, or government permission to create a corporation, which includes details about stock ownership.
Investors who buy common or preferred stock in a corporation become owners of the firm.

16. Corporations The advantages of corporations are:
ease of raising capital
professionals may run the firm instead of the owners (shareholders)
owners have limited liability
business’s life is unlimited
easy to transfer ownership

17. Corporations The disadvantages of corporations are:
a charter is expensive
ownership and management are separated so shareholders have little say in running the business
corporate income is taxed twice
subject to government regulation