Download business organizations

BUSINESS
ORGANIZATIONS
Economic institutions – persons and organizations that
use or represent the factors of production
Business Organizations – a profit-seeking enterprise that
serves as the main link between scarce resources and
consumer satisfaction
Sole Proprietorships
A business owned and run by one person
The Most common form of business
Strengths
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Easy to form
Easy to manage
Profits don’t need to be shared
No business income tax
Personal “self fulfillment”
Easy to go out of business
Weaknesses
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Owner has unlimited liability
Limited access to capital
Limited efficiencies
Limited business knowledge
Limited access to qualified
employees
• Limited life of the business
Partnerships – a business jointly owned by two or more persons
Types of Partnerships
• General – all partners are
responsible for the
management and financial
obligations
• Limited – at least one
partner is not active in the
daily running of the business
Requires Legal
Organization
• Articles of partnership
• Specifically details “who
does, gets and pays what”
Partnerships
Strengths
• Relatively easy to start
• Managerial resources
• Lack of special taxes (usually
only a special schedule)
• Economic capital
• Efficiencies are easier to
accomplish
• Talent easier to attract
Weaknesses
• All partners are responsible for
the acts of the partnership
(limited partners have limited
responsibility)
• Limited business life
• Potential conflict in management
Corporations
– a business organization recognized by law as a
separate legal entity having all the rights of an individual (buy and sell property, make
contracts, be sued, etc.)
Permission to form must
come from the state or
federal government
• Charter – government form
permitting incorporation
• Specifies number of shares
(stock)
Corporate structure
• Stock ownership gives you
part ownership in the corp.
• Common stock
• Preferred stock
Corporations
Strengths
• FINACIAL CAPITAL (stocks
and bonds)
• Large resources of skilled
employees
• Shared financial responsibility
• Unlimited business life
• Easy to transfer ownership
Weaknesses
• Difficult to start
• Limited input by shareholders
• Large operating expenses (tax
records, etc)
• Subject to government regulations
and interference