1. Major Forms of Business
Organization

2. Sole Proprietorship
Business Owned by One Person

3. Advantages of Sole Proprietorship
• Easy to start business.
• Owner makes all the decisions and is own
boss.
• Owner receives all profits.
• No business income taxes.
• Psychological—sense of freedom.

4. Disadvantages of a Sole
Proprietorship
• Capital is limited to what the owner can supply
or borrow.
• Unlimited liability - Owner is liable (responsible)
for all debts, even losing personal property if
business fails.
• 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.

5. Partnership
Business owned and managed by
a small group, often not more than
two or three people, who become
partners.

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 –
potential conflicts.
• Limited Life - Partnership ends of a partner quits or dies.
• Each partner shares the profit.

9. Corporation
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
incorporate.

10. Stock
• 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
and bonds.
• 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.

13. Franchise
Written contract granting
permission to sell someone else’s
product or service in a prescribed
manner over a certain period of
time and in a specified territory.

14. Cooperative
Business owned by the members it
serves and is managed in their
interest.
Consumer cooperative
Service cooperative
Producer cooperative

15. Non-Profit Organizations
Examples:
Towns or Municipal Corporations
Private Colleges and Universities
American Red Cross
Future Business Leaders of America

16. Labor Unions
• Work for its members’ interests in various
employment matters.
• 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
profession.
• Examples: American Bar Association,
American Management Association,
National Education Association, etc.

18. Business Organizations
• Chamber of Commerce
• Better Business Bureau

19. Government
• 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.