Business Organization
Characteristics of a Sole Proprietorship • A sole proprietorship a business is owned and run by one person. • Sole Proprietorships are the most numerous of all business organizations. • Sole Proprietorships are generally the smallest in size.
Strengths of a Sole Proprietorship • • • There are no business income taxes because the business is not recognized as a separate legal entity. Psychologically, it is better because it makes the owner feel in control and have a sense of personal freedom. • The ease at which the owner may get out of one if he wishes to do so. so • Strengths: It is easy to start a sole proprietorship. Secondly, is the relative ease in managing one. • Thirdly, the owner may enjoy the profits of good management without having to share them with other owners.
Weaknesses of a Sole Proprietorship Weaknesses: • One weaknesses of a sole proprietorship is that the owner has unlimited liability. • It is difficult to raise financial capital. • A third weakness is size and efficiency. • A fourth weakness is that the proprietor often has limited managerial experience. • It is difficult to attract qualified employees. • A sixth weakness is limited life meaning that if the owner dies, quits, or sells the business, the firm itself legally ceases to exist.
The Characteristics of a Partnership • A partnership a business jointly owned by two or is more persons. • A general partnership one in which all partners are is responsible for the management and financial obligations of the business. • A limited partnership one in which at least one is partner is not active in the daily running of the business although he or she may have contributed funds to finance the operation. • Because more than one owner is involved, formal legal papers called articles of partnership usually are drawn up to specify arrangements between partners.
Strengths of a Partnership Strengths: • • The first strength of a partnership is its ease of establishment. • Ease of management is the second strength. • • Many partnerships find it easier to attract top talent into • their organization. Partnerships can usually attract financial capital more easily than proprietorships. A partnership is slightly larger in size making efficiency easier to reach. A final strength is the lack of special taxes due to the fact that the partnership isn’t a separate legal entity.
Weakness of a Partnership • The main weakness in a general partnership is that each partner is fully responsible for the actions of the other partners. (In a limited partnership, there is limited liability. ) • A partnership has a limited life. • A third weakness is the potential conflict between partners.
Characteristics of a Corporation • A corporation a form of business is organization recognized by law as a separate legal entity having all that rights of an individual. • A corporation has the right to buy and sell property, enter into legal contracts, and sue and be sued.
Steps Taken in Forming Corporations • To incorporateor form a , corporation, people must file for permission from the national government or the state government where the business will have its headquarters. • If approved, acharter a – government document that gives permission to create a corporation that states the name of the company, address, purpose of business, and other features of the business-- is granted.
Ownership and Organization of Corporations. • The charter specifies the number of shares ofstock , or ownership parts of the firm. • Theses shares are certificates of ownership and are sold to investors called stockholders or shareholders. • If the corporation is profitable, it may eventually issue a dividend a check – representing a portion of the corporate earnings or profits– to each stockholder.
Strengths of a Corporation • • Strengths: The first strength is the ease of raising financial capital mostly by the selling of stocks and bonds. Secondly, the directors of the corporation can hire the best management available to run the firm. • A third strength is that there is limited liability for its owners. • The fourth strength is that corporations have unlimited lifethe – business continues to exist even when ownership changes. • The final strength is the ease of transferring ownership.
Weaknesses of a Corporation • • Weaknesses: • Thirdly, because the corporation is One weakness is the difficulty and expense recognized as a separate legal, entity, of getting a charter. it has to pay income Another weakness is taxes just like private that the owners, or individuals. shareholders, have little say in how the • Lastly, corporations are subject to more business is run after government they have voted for regulation that either members of the board sole proprietorships of directors. or partnerships.
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