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Published byNicholas Hamilton Modified over 9 years ago
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Forms of Business Organization (sole proprietorship, partnership, and corporation)
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TraditionalCommandMarket What to produce?TraditionGov’t How to produce?TraditionGov’t Who gets the item?TraditionGov’t
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TraditionalCommandMarket What to produce?TraditionGov’tWhat the consumer will buy / Profit How to produce?TraditionGov’t Who gets the item?TraditionGov’t
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TraditionalCommandMarket What to produce?TraditionGov’t What the consumer will buy / Profit How to produce?TraditionGov’tCheapest way Who gets the item?TraditionGov’t
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TraditionalCommandMarket What to produce?TraditionGov’t What the consumer will buy / Profit How to produce?TraditionGov’t Cheapest way Who gets the item?TraditionGov’tConsumer with money
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What is Business Organization A way to organize your business so that: –The business is easy to run –You can come up with money to run the company –You reduce your legal liability (responsibility) –Fits your “style”
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Sole Proprietorship One Owner Most popular in the United States
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Sole Proprietorship Advantages –Easy to start / stop –You get all of the profits –You have full control Disadvantages –Unlimited personal liability –Limited access to money from banks –Lack of permanence
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Partnership Owned by two or more people Various forms of partnerships – general (all share equally) –Limited (one has unlimited liability, the others do not) –Limited Liability Partnerships (LLP) (all partners have limited liability) (all partners have limited liability)
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Partnerships Advantages –Easy to start –Shared decision making –Greater ability to get money from banks Disadvantages –Unlimited liability –Conflicts with partners –Harder to manage?
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Corporations A company owned by stockholders A legal “person” in the eyes of the law Ownership (stockholders) separate from management (the president, etc.) Each stockholder has limited liability (up to the value of your stock investment)
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Structure of a Corporation
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Corporations Advantages –Limited liability for stockholders –Easy to raise money StocksBonds –Many people share the wealth Disadvantages –Difficult and expensive to start –Double taxation –Hard to control –More regulation
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