1. CHAPTER 5
1A) Explain what a sole proprietorship is?
1B) State & summarize the advantages.
1C) State & summarize the disadvantages.
2A) Explain what a partnership it.
2B) State & summarize the advantages.
2C) State & summarize the disadvantages.
3A) Explain what a corporation is.
3B) State & summarize the advantages.
3C) State & summarize the disadvantages.
2. SOLE PROPRIETORSHIP
-”A BUSINESS OWNED & MANAGED BY ONE INDIVIDUAL.”
-ACCOUNT FOR 72% OF ALL BUSINESSES IN THE US.
-THE OWNER HAS “UNLIMITED PERSONAL LIABILITY.”
-ALL PROFITS & DEBTS ACCRUE TO THE OWNER.
BILL HERLICKA
3. ADVANTAGES/DISADVANTAGES
ADVANTAGES:
1)SIMPLE TO CREATE
2)LEAST COSTLY FORM OF OWNERSHIP
3)LEAST REGULATED FORM OF OWNERSHIP
4)PROFIT INCENTIVE
5)TOTAL DECISION-MAKING AUTHORITY
6)EASY TO DISCONTINUE
DISADVANTAGES:
1)UNLIMITED PERSONAL LIABILITY
2)LIMITED SKILLS & CAPABILITIES
3)FEELINGS OF ISOLATION
4)LIMITED ACCESS TO CAPITAL
5)LACK OF CONTINUITY
4. PARTNERSHIP
-”AN ASSOCIATION OF 2 OR MORE PEOPLE WHO CO-OWN A BUSINESS FOR
THE PURPOSE OF MAKING A PROFIT.”
-CO-OWNERS (PARTNERS) SHARE THE BUSINESS’S ASSETS, LIABILITIES, &
PROFITS.
-PARTNERSHIP AGREEMENT
-”A DOCUMENT THAT STATES IN WRITING THE TERMS UNDER WHICH THE
PARTNERS AGREE TO OPERATE THE PARTNERSHIP, & PROTECTS EACH
PARTNER’S INTEREST IN THE BUSINESS.”
SAM & MARIAH CALAGIONE
5. ADVANTAGES/DISADVANTAGES
ADVANTAGES:
1)EASY TO ESTABLISH
2)COMPLEMENTARY SKILLS
3)DIVISION OF PROFITS
4)LARGER POOL OF CAPITAL
5)ABILITY TO ATTRACT LIMITED PARTNERS
6)LITTLE GOVERNMENT REGULATION
7)FLEXIBILITY
8)TAXATION
DISADVANTAGES:
1)UNLIMITED LIABILITY OF AT LEAST ONE PARTNER
2)CAPITAL ACCUMULATION
3)DIFFICULTY IN DISPOSING OF PARTNERSHIP INTEREST
4)LACK OF CONTINUITY
5)POTENTIAL FOR PERSONALITY & AUTHORITY CONFLICTS
6)PARTNERS ARE BOUND BY THE LAW OF AGENCY
6. CORPORATION
-”A SEPARATE LEGAL ENTITY APART FROM ITS OWNERS WHICH
RECEIVES THE RIGHT TO EXIST FROM THE STATE IN WHICH IT IS
INCORPORATED.”
-A GROUP OF INDIVIDUALS WORKING TOGETHER TO SERVE A
VARIETY OF OBJECTIVES.
-THE MAIN OBJECTIVE IS TO EARN LARGE, GROWING, SUSTAINED,
LEGAL RETURNS ($$$) FOR THE PEOPLE WHO OWN THE BUSINESS.
7. ADVANTAGES/DISADVANTAGES
ADVANTAGES:
1)LIMITED LIABILITY OF STOCKHOLDERS
2)ABAILITY TO ATTRACT CAPITAL
3)ABILITY TO CONTINUE INDEFINITELY (PERPETUAL LIFETIME)
4)TRANSFERABLE OWNERSHIP
DISADVANTAGES:
1)COST & TIME TO ESTABLISH & MAINTAIN
2)DOUBLE TAXATION
3)POTENTIAL FOR DIMINISHED MANAGERIAL INCENTIVES
4)LEGAL REQUIREMENTS & REGULATORY RED TAPE
5)POTENTIAL LOSS OF CONTROL BY THE FOUNDER(S)