3. Advantages of Sole Proprietorship
• Easy to start business.
• Owner makes all the decisions and is own
• Owner receives all profits.
• No business income taxes.
• Psychological—sense of freedom.
4. Disadvantages of a Sole
• Capital is limited to what the owner can supply
• Unlimited liability - Owner is liable (responsible)
for all debts, even losing personal property if
• Long hours and hard work necessary and owner
may have limited skills.
• Limited life - Life of the business depends upon
owner; it ends if owner quits or dies.
6. Types of Partnerships
• General Partnership – all partners
responsible for the management and
financial obligations of the business.
• Limited Partnership – at least one partner
not active in daily running of the business.
7. Advantages of a Partnership
• Fairly easy to start the business.
• Easier management – each partner brings ideas and
expertise to the business.
• Special taxes on partnership.
• More sources of capital available.
• More business skills available – usually can attract top
talent into the business.
8. Disadvantages of a Partnership
• Each partner liable for business debts made by all
partners, even to losing personal property if business
fails (unless partnership is limited liability partnership).
• Each partner can make decisions, more than one boss –
• Limited Life - Partnership ends of a partner quits or dies.
• Each partner shares the profit.
Business owned by a number of people
(called stockholders or shareholders)and
operated under written permission from
the state in which it is located. Charter is
granted giving business permission to
• Stockholders or shareholders – investors
who become owners of the corporation.
• Common stock – basic ownership – one
vote for each share of stock owned.
• Preferred stock – non-voting ownership,
but get dividends first.
• Dividends – Money representing a portion
of the corporate profits.
11. Advantages of a Corporation
• More sources of capital available – stocks
• Specialized managerial skills available.
• Limited liability - Owners liable only up to
the amount of their investment.
• Ownership can be easily transferred
through the sale of stock; business not
affected by change of ownership.
• Unlimited life.
12. Disadvantages of a Corporation
• Difficult and more expensive to start the corporation.
• Owners do not have control of decisions made each day,
unless they are officers of the company.
• Business activities of the corporation limited to those
stated in the certificate of incorporation.
• Very detailed record keeping and corporation required to
pay income tax on profits.
• More government regulation.
16. Labor Unions
• Work for its members’ interests in various
• Use collective bargaining – negotiating for
benefits, working conditions, etc. between
management and labor representatives.
17. Professional Organizations
• Organization of people in specialized
occupations that work to improve the
• Examples: American Bar Association,
American Management Association,
National Education Association, etc.
• Link between consumers and resources.
• Directly produce and distribute certain goods
and services to consumers.
– Tennessee Valley Authority
– National Defense
• Indirectly acts as regulator with things such as
public utilities, Social Security, etc.