Organization and Management A New business must be organized in a way that will help it produce...
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Organization and Management
A New business must be organized in a way that will help it produce goods effectively and efficiently.
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Businesses are organized in 3 basic ways.
1. Sole Proprietorship
2. Partnership
3. Corporation
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Sole Proprietorship
Is a business that one person or a married couple own by themselves.
The one person or married couple share income, profits, assets and risks.
What are risks?
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Sole Proprietorship
Almost always small businesses few individuals can afford to start a large business.
Examples- newsstands, gas stations barbershops, lawncare
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Sole Proprietorship-Advantages
They are their own bosses.
They receive all the profit.
They set their own hours.
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Sole Proprietorship-disadvantages
Owner must provide all the cash.
Owner must take all the risks.
If their business fails they lose all the money they put into it.
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Partnerships
Is a business that two or more people own. Lawyers often form partnerships
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Partnership
Usually small businesses but larger the sole proprietorships.
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Why set up Partnerships?
To pool their capital because individually they do not have enough money to start a business.
Combine different skills.
Share workload.
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Partnerships
Share profit and financial risks.
Partners usually sign a written agreement that spells out responsibilities of each partner.
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Disadvantages of a partnership
Disagreements
It can be complicated if the partners have a falling out and one wants to end the partnership.
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Corporations
Is a large business that has many owners.
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Corporation
Starting a large business requires more money then most individuals can afford. (read 437)
Stock is the shares of ownership in a corporation.
Stockholders are the people that buy the stock.
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Corporation
When you buy stock in a partnership you are gambling to the corporation will make money.
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Corporation
Common Stock- a share of a corporation that pays its owner a dividend if the corporation makes a profit.
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Dividends-
A share of profit paid to stockholders of a corporation.
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Preferred Stock
Stock that earns a fixed amount each year the corporation makes a profit.
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Advantages of Corporations
A great many people share the risk
They have limited liability you only lose what you invested.
If owner dies corporation continues.Read 439