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Business Organizations: Sole Proprietorship, Partnership, Corporation, and Franchise

Learn about the differences between Sole Proprietorship, Partnership, Corporation, and Franchise, their advantages, disadvantages, and how they operate in the business world.

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Business Organizations: Sole Proprietorship, Partnership, Corporation, and Franchise

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  1. Chapter 37 Business Organizations

  2. What is Sole Proprietorship? • The simplest, most flexible, and easiest to start. • ONE Owner

  3. Advantages • Have control over all decisions • Pay scale • Hours • Inventory or what to sell • Keeps all profits.

  4. Disadvantages • All financial responsibility • Personal property may be taken to pay for debt. • Not as much start up capital. • Limited experience and knowledge • Stress Level • Lots of Hours.

  5. Partnership • An association of TWO or MORE Persons. • Co-Owners

  6. Advantages • More start up capital • Share expenses and debt. • Combine labor, skill and knowledge

  7. Disadvantages • Share Profit • Lose some control over decisions • Personality Conflicts.

  8. How is a Partnership Ended? • Dissolution occurs when both parties agree to end. • Death • Court Decree or Order

  9. What is a Corporation? • A legal entity or artificial person in the eyes of the law. • Its existence it distinctly separate from real people who organize, own and run it. • Created by and for the people.

  10. Advantages • Perpetual Life • Limited Liability • Transferability of Ownership Interests • Ability to attract large sums of capital • Professional management

  11. Disadvantages • Taxes – 2 times. The corporation gets taxed on its income, and individuals get taxed when they receive their checks. • Hard to start and manage. • Legal issues to face. • Cost lots of money to get started.

  12. S Corporation • Organized under Subchapter S of the Internal Revenue Code. • Only has 1 class of stock----Common • No more than 35 Shareholders. • Taxes-Treated as a Partnership.

  13. What is a Stock? • Share of ownership in a company.

  14. Common Stock • Paid Second after Preferred • Dividends depend on Income of Corporation. • Vary from quarter to quarter. • Voting power. One vote per share of stock.

  15. Preferred Stock • Paid first • Guaranteed a certain amount of money-if the corporation has money to give. • No Voting Power

  16. Shareholder • The person who owns the stock. • Also called a Stockholder

  17. Franchise • Corporation owned business that sells permission to own operate on their behalf.

  18. Advantages of a Franchise • Success rate is very high. • Very little risk • Consumer recognition • Production Identification already established. • Marketing decisions already done for you. • Professional Management to assist you.

  19. Disadvantages of a Franchise • Limited control over decisions • Marketing, advertising, product choices are done for you. • A franchise fee –large amount.

  20. Legal Involvement of Government in Business • See Transparency

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