BUSINESS

ORGANIZATIONS

CHAP T ER 3

TYPES OF BUSINESS ORGANIZATIONS

Sole Proprietorships Partnerships Corporations

SOLE PROPRIETORSHIPS A business owned and run by one person

Easy to start Just need to pay business licenses and

fees

Example:Opening up yourown restaurant

SOLE PROPRIETORSHIP: ADVANTAGES

Easy to start and manage Easy to leave business Don’t have to share

profits No separate taxes Personal satisfaction

SOLE PROPRIETORSHIP: DISADVANTAGES

Unlimited liability Hard to get funding Difficult to be efficient

and profitable Hard to find talented

employees Limited lifetime of business

PARTNERSHIPS

PARTNERSHIPS A business jointly owned by two or

more persons Types of partnerships

General partnershipLimited partnership

Easy to startPartners decide how to divide losses and profits

They’re starting a fishing business.

PARTNERSHIPS: ADVANTAGES Easy to start Partners bring in different skills No separate taxes Easier to get funding/

loan Easier to be run

efficiently

PARTNERSHIPS: DISADVANTAGES

Responsible for all partners’ actions Conflicts between

partners Liability if company fails Limited life of business

CORPORATIONS

CORPORATIONS A corporation is a business organization

recognized by law as a separate entity having the rights of an individual

To form a corporation: Government CharterStocksInvestors

CORPORATIONS: ADVANTAGES

Easier to get a loan Professional managers can run it Limited liability for owner(s) Unlimited life of the

business

CORPORATIONS: DISADVANTAGES

Hard to get charter Owners don’t have full

control on day-to-day operations

Double taxation Government regulations

BUSINESS GROWTH AND EXPANSION

Reinvestment Growth Through Mergers

Types of Mergers Horizontal mergers Vertical mergers Conglomerates Multinational