ࡱ> MOL{ bjbjzz 24  +qqq*******$,x/f*qqqqq**q *q*O(?*@?h { (**0+ )6//,?*/?*Hqqqqqqq**qqq+qqqq/qqqqqqqqq : TYPES OF BUSINESS ORGANIZATIONS The three main types of for-profit business organizations are: Sole proprietorship (sole trader) Partnership Corporation 1. SOLE PROPRIETORSHIP (SOLE TRADER) A business that is owned by one individual who is in charge of all aspects of the business. 2. PARTNERSHIP A business that is owned by two or more owners who pool their financial and human resources and operate the business as co-owners under a voluntary legal agreement (Partnership Agreement) that they have entered into on a voluntary basis. 3. CORPORATION A business that is a separate legal entity created under state law. Ownership is obtained through the purchase of shares of stock in the corporation. ADVANTAGES AND DISADVANTAGES OF THE DIFFERENT FORMS OF BUSINESS ORGANIZATION BUSINESS ORGANIZATION ADVANTAGES DISADVANTAGES Sole Proprietorship Easy to startup Owner makes all decisions Owner keeps all profits Owner can decide own hours Owner has unlimited liability Owner may need to hire outside experts Limited access to capital Business dies when the owner dies  Partnership Owners share workload Owners share financial burden Easier access to capital Each owner may have different strengths Owners may not get along with each other Mutual agency owners responsible for partners actions. Partners have unlimited liability Owners share the profits  Corporation The corporation has easy access to capital Unlimited life Owners liability limited to the amount invested in the company Specialized management skills  Startup is expensive Double taxation corporation pays tax on profit and shareholders pay taxes on dividends Heavily regulated by the government Limited role in decision making  ADVANTAGES AND DISADVANTAGES OF THE DIFFERENT FORMS OF BUSINESS ORGANIZATION BUSINESS ORGANIZATION ADVANTAGES DISADVANTAGES Sole Proprietorship Definition: Example: 1. 2. 3. 1. 2. 3. Partnership Definition: Example: 1. 2. 3. 1. 2. 3. Corporation Definition: Example: 1. 2. 3. 1. 2. 3. TYPES OF BUSINESS ORGANIZATIONS DISCUSSION QUESTIONS Why is the sole proprietorship the most common form of business organization? Why does a corporation have easy access to capital? What factors should be considered before choosing a form of business ownership? 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