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1.02—Types of Business Organization. Objective 1.02 Compare the main types of business organization: Sole proprietorship, partnership, corporation, and franchise. Sole Proprietorship. Owned by one person Examples Floral shops Bookstores Farms Advantages Easy to start

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1 02 types of business organization l.jpg

1.02—Types of Business Organization

Objective 1.02 Compare the main types of business organization:

Sole proprietorship, partnership, corporation, and franchise


Sole proprietorship l.jpg
Sole Proprietorship

  • Owned by one person

  • Examples

    • Floral shops

    • Bookstores

    • Farms

  • Advantages

    • Easy to start

    • Owner is his/her own boss

    • Owner keeps all profits

  • Disadvantages

    • Owner must pay for everything needed for the business

    • Difficult to obtain capital needed to start

    • Owner might lack business skills

    • Unlimited liability—owner has full responsibility for company’s debts and can lose entire investment as well as personal assets


Partnership l.jpg

Owned by two or more people

Examples

Law firms

Medical practices

Auto Body Repair

Advantages

Relatively easy to start

Easier to obtain capital than in a sole proprietorship

Partners share skills and talents

Partners share risks

Disadvantages

Partnership agreement is needed to start

Partners might not get along well

Partners must share profits

Partnership must be reorganized if one partner quits

Partners share unlimited liability—all partners share the responsibility of a bad decision made by one partner (including debts)

Partnership


Corporation l.jpg

Owned by many people—stockholders, but treated by law as one person (can own property, pay taxes, make contracts)

Advantages

Corporations can raise money by selling stock

Limited liability—stockholders can only lose what they have invested

Corporation continues when stockholders sell stock

Corporation can always make money by selling more stock

Examples

Nike

IBM

Google

Disadvantages

Corporations are taxed on their profits

Government closely regulates corporation

More difficult to start a corporation

Must obtain a corporate charter from the state in which headquarters is located

Corporation


Franchise l.jpg

Franchise one person (can own property, pay taxes, make contracts) is a contractual agreement to sell a company’s products or services in a specific geographic area

Advantages

Easy to start

Franchisee can rely on good name and expertise of the parent company

Franchisee can get needed guidance in operating the business from franchisor

Disadvantages

Some franchisors are strict about how the business is run

Franchise is limited in what products or services can be sold

Franchise must operate like every other franchise

Examples

Taco Bell

Blockbuster

McDonald’s

Franchise


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