2. Three Types of Business
Organization:
• Sole Proprietorship – a business
that is owned and managed by one
individual who receives all the
profits and bears all losses.
• Partnership – a business that is
owned and managed by two or
more individuals who receive all
profits and bear all losses.
3. Three Types of Business
Organization:
• Corporation – a business that is
owned by stockholders and that
has legal rights and responsibilities
as if it were a person.
4. • Easiest and least expensive form of ownership
to organize.
• Are in complete control, and within the
parameters of the law, may make decisions as
they see fit.
• Receive all income generated by the business
to keep or reinvest.
• The business is easy to dissolve, if desired.
Advantages of a Sole Proprietorship
5. • Have unlimited liability and are legally
responsible for all debts against the business.
• May be at a disadvantage in raising funds and
are often limited to using funds from personal
savings or consumer loans.
• May have a hard time attracting high-caliber
employees or those that are motivated by the
opportunity to own a part of the business.
Disadvantages of a Sole
Proprietorship
6. • Easy to establish; however time should be
invested in developing the partnership
agreement.
• The ability to raise funds may be increased.
• Profits flow directly through to the partners’
personal tax returns.
• Business usually will benefit from partners
who have complimentary skills.
Advantages of a Partnership
7. • Partners are jointly and individually liable for
the actions of the other partners.
• Profits must be shared with others.
• Since decisions are shared, disagreements can
occur.
• May have a limited life; it may end upon the
withdrawal or death of a partner.
Disadvantages of a Partnership
8. Advantages of a Corporation
• Shareholders have limited liability
for the corporation’s debts or
judgments against the
corporations.
• Shareholders can only be held
accountable for their investment in
stock of the company.
• Can raise additional funds through
the sale of stock.
9. Disadvantages of a Corporation
• The process of incorporation
requires more time and money.
• Corporations are monitored by
federal, state and some local
agencies, and as a result have more
paperwork to comply with
regulations.
• Incorporating may result in higher
overall taxes.
