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Business Organizations

Business Organizations. Chapter 8 . 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 .

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Business Organizations

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  1. Business Organizations Chapter 8

  2. 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.

  3. Sole Proprietorship • 70% of all businesses in the U.S. are sole proprietorships, but they account for only 4% of all U.S. sales.

  4. Advantages of Sole Proprietorship • Easy to start up • Must meet some minimum requirements; • Authorization: a business license which is an authorization to start a business issued by the local government. • Site permit: a certificate of occupancy if not working out of home. • Name: must register a business name.

  5. 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.

  6. Advantages of Sole Proprietorship • Sole Receiver of Profit

  7. Advantages of Sole Proprietorship • Full control • Easy to Discontinue

  8. 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.

  9. 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.

  10. 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.

  11. Partnershipssection 2

  12. Partnerships • A partnership is a business organization owned by two or more persons who agree on a specific division of responsibilities and profits.

  13. Types of Partnership • General Partnership: partnership in which partners share equally in both responsibility and liability.

  14. 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.

  15. 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.

  16. 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.

  17. 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.

  18. Advantages of Partnerships • Shared decision making and Specialization.

  19. Advantages of Partnerships • Larger pool of capital.

  20. Advantages of Partnerships • Taxes • Like sole proprietorships, partnerships are not subject to special taxes.

  21. 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.

  22. Disadvantages of Partnerships • Not complete control, must choose partners carefully.

  23. Disadvantages of Partnerships • Potential for conflict

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