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SC – Business Organization (B). Lim Sei Kee @ cK. Sole proprietorship. A sole proprietorship is a business entity owned by one person who is legally responsible for the debts and taxes of the business. Sole proprietorship. Ownership: 1 owner Life: Ends when owner:

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sole proprietorship
Sole proprietorship

A sole proprietorship is a business entity owned by one person who is legally responsible for the debts and taxes of the business

sole proprietorship1
Sole proprietorship
  • Ownership: 1 owner
  • Life: Ends when owner:
  • Is unable to carry on,
  • Dies, or
  • Closes the firm

Responsibility for business debts if firm is unable to pay: Owner

advantages
ADVANTAGES
  • Total control
  • Cheap and easy to start up
  • Keep all the profit
  • Business affairs are private
disadvantages
DISADVANTAGES
  • Unlimited liability
  • Can be difficult to raise finance
  • Can be difficult to enjoy economies of scale, i.e. lower costs per unit due to higher levels of production
  • There is a problem of continuity if the sole trader retires or dies
partnership
Partnership
  • Ownership: 2 or more
  • Life: Ends when partner(s):
  • withdraws,
  • Dies, or
  • Closes the firm

Responsibility for business debts if firm is unable to pay: Partners individually and jointly

partners must agree upon
Partners must agree upon:
  • Amount each partner will contribute
  • Percentage of ownership of each partner
  • Share of profits of each partner
  • Duties each partner will perform
  • Debts- the responsibility each partner has for the partnership’s debts
advantages1
ADVANTAGES
  • Spreads the risk across more people
  • Partner may bring money and resources to the business (e.g. better premises to work from)
  • Partner may bring other skills and ideas to the business
  • Increased credibility with potential customers and suppliers
disadvantages1
DISADVANTAGES
  • Have to share the profits.
  • Less control of the business for the individual.
  • Disputes over workload.
  • Problems if partners disagree over of direction of business.
company corporation
Company / Corporation
  • A company / corporation is a publicly or privately owned business entity that is separate from its owners and has a legal right to own property and do business in its own name; stockholders are not responsible for the debts or taxes of the business
company corporation1
Company / Corporation
  • Ownership: Can be thousands
  • Life: Continues indefinitely; ends when:

-business goes bankrupt

-stockholders vote to liquidate

Responsibility for business debts if firm is unable to pay: Stockholders can lose only the amount invested

advantages2
ADVANTAGES
  • Limited liability
  • Easier to raise finance
  • Stable form of structure
  • Provides more privacy of information than an public limited company
disadvantages2
DISADVANTAGES
  • Greater admin costs
  • Public disclosure of company information (annual report & accounts + annual return)
  • Directors’ legal duties (set out by Companies Act)
cooperatives
Cooperatives
  • The objectives are normally more focused on the members of the co-operative, the local community and the world community. Profit is not the primary objective.
advantages3
ADVANTAGES
  • Achieve a common purpose.
  • More power to buy or bargain
disadvantages3
DISADVANTAGES
  • A long, drawn out decision-making process
  • Co-operatives may find it difficult to raise finance
  • Idealistic and ethical aims may not be agreeable with all members
  • The aims held by many co-operatives may not lead to profits in the long run
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