chapter 8 b usiness o rganizations. s ole p roprietorships a business organization is an...
TRANSCRIPT
Chapter 8
BUSINESS ORGANIZATIONS
SOLE PROPRIETORSHIPS
A business organization is an establishment formed to carry on commercial enterprise.
A sole proprietorship is a business owned and managed by a single individual.
SOLE PROPRIETORSHIP
70% of all businesses in the U.S. are sole proprietorships, but they account for only 4% of all U.S. sales.
ADVANTAGES OF SOLE PROPRIETORSHIP
Easy to start up
Must meet some minimum requirements;
1. Authorization: a business license which is an authorization to start a business issued by the local government.
2. Site permit: a certificate of occupancy if not working out of home.
3. Name: must register a business name.
ADVANTAGES OF SOLE PROPRIETORSHIP
Relatively few regulations, it is the least regulated form of business organization.
Zoning laws are laws in a city or town that designates separate areas for residency and for business.
ADVANTAGES OF SOLE PROPRIETORSHIP
Sole Receiver of Profit
ADVANTAGES OF SOLE PROPRIETORSHIP
Full control
Easy to Discontinue
DISADVANTAGES OF SOLE PROPRIETORSHIP
Unlimited personal liability
Liability is the legally bound obligation to pay debts.
May even lose personal property to
make up debts.
DISADVANTAGES OF SOLE PROPRIETORSHIP
Limited access to resources
Having to pay for everything out of your pocket limits you.
Hard to expand quickly.
Individual strengths and weaknesses.
DISADVANTAGES OF SOLE PROPRIETORSHIP
Lack of Permanence
Limited life to due the ownership by one person.
Hard to keep employees, no fringe benefits, which are payments other than wages or salaries. Health care, paid vacation, retirement.
PARTNERSHIPSSECTION 2
PARTNERSHIPS
A partnership is a business organization owned by two or more persons who agree on a specific division of responsibilities and profits.
TYPES OF PARTNERSHIP
General Partnership: partnership in which partners share equally in both responsibility and liability.
TYPES OF PARTNERSHIP
Limited Partnership: partnership in which only one partner is required to be a general partner, or the one who is liable for the company. The other partners only contribute money.
TYPES OF PARTNERSHIP
Limited liability partnerships (LLP): partnership in which all partners are limited partners.
Partners are limited from personal liability in certain situations, such as another partner’s mistakes. Attorneys, doctors, dentist, and accountants.
ADVANTAGES OF PARTNERSHIPS
Easy to start-up.
Law does not require written agreement, but most develop articles of partnership, which is simply a partnership agreement outlining how the business will run.
ADVANTAGES OF PARTNERSHIPS
If no articles of partnership they use the Uniform Partnership Act (UPA), an act adopted by most states that gives common ownership interests, profit and loss sharing, and shared management responsibilities in a partnership.
ADVANTAGES OF PARTNERSHIPS
Shared decision making and Specialization.
ADVANTAGES OF PARTNERSHIPS
Larger pool of capital.
ADVANTAGES OF PARTNERSHIPS
Taxes
Like sole proprietorships, partnerships are not subject to special taxes.
DISADVANTAGES OF PARTNERSHIPS
Many of the disadvantages of sole proprietorship also apply to partnerships.
Unlimited liability, unless it is LLP.
General partner can lose everything.
DISADVANTAGES OF PARTNERSHIPS
Not complete control, must choose partners carefully.
DISADVANTAGES OF PARTNERSHIPS
Potential for conflict