This document compares the main types of business organizations: sole proprietorships, partnerships, corporations, and franchises. It outlines the key characteristics, advantages, disadvantages, and examples of each type. Sole proprietorships are owned by one person, partnerships by two or more people, corporations are owned by stockholders but treated as a single entity, and franchises operate under a contractual agreement with a parent company.

1. 1.02—Types of Business
Organization
Objective 1.02 Compare the main types of business organization:
Sole proprietorship, partnership, corporation, and franchise

2. Sole Proprietorship
 Owned by one person  Disadvantages
 Owner must pay for
 Examples everything needed for the
business
 Floral shops
 Difficult to obtain capital
 Bookstores
needed to start
 Farms  Owner might lack
business skills
 Advantages  Unlimited liability—owner
 Easy to start has full responsibility for
 Owner is his/her own company’s debts and can
boss lose entire investment as
 Owner keeps all profits well as personal assets

3. Partnership
 Owned by two or more  Disadvantages
people  Partnership agreement is
 Typical Examples needed to start
 Law firms  Partners might not get
 Medical practices along well
 Partners must share
 Advantages profits
 Relatively easy to start  Partnership must be
 Easier to obtain capital reorganized if one partner
than in a sole quits
proprietorship  Partners share unlimited
 Partners share skills and liability—all partners share
talents the responsibility of a bad
 Partners share risks decision made by one
partner (including debts)

4. Corporation
 Owned by many people—  Examples
stockholders, but treated by  Nike
law as one person (can own  IBM
property, pay taxes, make  Google
contracts)  Disadvantages
 Advantages  Tax filing by corporation,
 Corporations can raise as well as owners &
money by selling stock workers
 Limited liability—  Government closely
stockholders can only lose
what they have invested regulates corporation
 More difficult to start a
 Corporation continues when
stockholders sell stock corporation
 Corporation can always  Must obtain a corporate
make money by selling more charter from the state in
stock which headquarters is
located

5. Franchise
 A business where there is a  Disadvantages
contractual agreement to  Some franchisors are strict
sell another company’s about how the business is
products or services in a run
specific geographic area  Franchise is limited in what
 Advantages products or services can be
sold
 Easy to start
 Franchise must operate like
 Franchisee can rely on
every other franchise
good name and expertise
of the parent company  Examples
 Franchisee can get needed  Taco Bell
guidance in operating the  Blockbuster
business from franchisor  McDonald’s