sole proprietorship

1. 8-1: SOLE PROPRIETORSHIP
PPT Notes

2. Business Organization
Definition: enterprise that
produces goods or provides
services in order to make a
profit

3. Sole Proprietorship
Definition: business owned and
managed by one person
 Account for more than 70% of
all businesses in the U.S.
 Generate less than 5% of all
sales

4. Advantages of Sole
Proprietorships
1. Easy to open and close
 Requires money, license,
permit, and registered name
2. Few regulations

5. Advantages… (continued)
3. Freedom and control
 1 person makes the decisions
4. Owner keeps profits

6. Disadvantages of Sole
Proprietorships
1. Limited funds/money
2. Limited life
3.Unlimited liability
 Owner is responsible for all
financial aspects of the business

7. 8-2: FORMS OF PARTNERSHIPS

8. Partnerships
Definition: a business co-owned
by 2 or more people who agree
on how responsibilities, profits,
and losses are divided

9. Types of Partnerships
General partnership: partners
share management of the
business
 Each partner is liable for all
business debts/losses

10. Types of Partnerships (continued)
Limited partnerships:
partnership in which 1 person is
not actively involved in the day-
to-day running of the business
 This partner is only liable for
what he/she has invested

11. Types of Partnerships (continued)
Limited liability partnership (LLP):
all partners are limited partners
 Not responsible for the debts
and liabilities of the other
partners

12. Types of Partnerships (continued)
Not all businesses can register as
LLP’s
LLP’s usually include medical
partnerships, law firms, and
accounting firms

13. Advantages of Partnerships
1. Easy to open and close
2. Few regulations
3. Access to resources (money)

14. Advantages of Partnerships
(continued)
4. Joint decision-making
5. Specialization
 Each partner may bring specific
skills to the business

15. Disadvantages of Partnerships
1. Unlimited liability
 Partners are responsible for all
of the business’s debt
2. Potential for conflict
Caused by more than 1 person
making decisions

16. Disadvantages of Partnerships
(continued)
3. Limited life
 When a partner dies, retires, or
leaves, the partnership ends

17. Questions
 1. Explain how a sole proprietorship
rests on the principles of free enterprise.

18.  2. If you were looking to form a
partnership, what traits would you want
in a partner? Name 5 traits (and no…
good looking doesn’t count).

19.  3. Ideally, would a major retail or
manufacturing business work as a
partnership? Explain why or why not.

20.  4. Name 2 types of businesses that
would thrive as sole proprietorships.

21.  5. Name 2 types of businesses that
would thrive as partnerships.