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Understanding Sole Proprietorships and Partnerships in Business Management

This document by Mr. Bernstein delves into the concepts of sole proprietorships and partnerships, highlighting their definitions, advantages, disadvantages, and structural differences. Sole proprietorships, which account for 76% of U.S. businesses, are simple to establish and provide full control to the owner. However, they come with unlimited liability and challenges in capital acquisition. Partnerships, the second most common business form, allow for shared responsibilities and easier capital raising but can lead to complications without clear agreements. The document emphasizes the differences between general and limited partners.

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Understanding Sole Proprietorships and Partnerships in Business Management

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  1. Business Administration & Management Mr. Bernstein Proprietorships and Partnerships, pp 117-129 April 1, 2014

  2. Business Administration & ManagementMr. Bernstein Sole Proprietorships A business that is owned and operated by one person 76% of businesses in the US are sole proprietorships Why? Easiest to create Owners receives all profits, controls all decisions The least regulated form of ownership No double taxation

  3. Business Administration & ManagementMr. Bernstein Sole Proprietorships Disadvantages: Unlimited liability Reliant on one person Raising capital can be difficult

  4. Business Administration & ManagementMr. Bernstein Partnerships Most common form of ownership other than sole proprietorship Why? Partners compensate for the weaknesses of the other Easier to raise capital than sole proprietorship Can expand customer base No double taxation Reduce competition Partnerships can face difficulties if responsibilities are not clearly outlined, or if interests of a partner change

  5. Business Administration & ManagementMr. Bernstein General vs. Limited Partners General Partners have unlimited liability and full responsibility for running the business Any General Partner can enter fully binding contracts on behalf of the partnership All Partnerships must have at least one general partner Limited Partners have a defined liability (ie in $$$) and do not participate in business decisions (“silent partner”)

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