Chapter 3 Business Organizations

1. Chapter 3Business Organizations • Sole Proprietorships • Owned and run by one person • The most common type of business organization • Advantages: • Simple to start and end • Simple management structure • Owner retains all profits • Simple tax structure

2. Sole Proprietorship(Cont.) • Disadvantages: • Unlimited Liability • Start-up money or financial capital • Lack of skilled/experienced employees

3. Partnerships • Joint ownership of the company • The least common form of business structure • Two types: • General and Limited • Advantages: • Similar to proprietorships • Easier to attract investors and skilled labor

4. Partnerships(Cont.) • Disadvantages: • Partners are fully responsible for the actions of the other partners (exception—for limited partnerships) • Disagreements between partners

5. Corporations • Separate legal entity, almost like an individual • A corporation insulates the activities of the business from the individuals running it • Corporations can offer stock: • Common stock—stockholder has a vote • Preferred stock—no vote, but receive dividends before common stock holders

6. Corporations(Cont.) • Advantages: • It can acquire financial capital easily through the selling of stock or bonds • Limited liability • Owners can easily enter or leave the company

7. Corporations(Cont.) • Disadvantages: • Difficult to start • Owners have little say in the day-to-day operations • Double taxation—corporate profits are taxed and when those profits are distributed to shareholders • More government regulation—mergers may need to be approved and internal records must be shared

8. The Role of the Government • Regulation to protect consumers: • Most common in key industries like banking, insurance, transportation, and utilities • Business Development: • Governors and mayors act as salesmen for their state or city • Arnold Schwarzenegger