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Forms of business organization (Partnership — a firm owned and controlled…
Forms of business organization
Sole proprietorship
- a firm owned and controlled (managed) by a single person
Advantages
3.The owner can keep profits of successful management without having to share them with other owners
Management is relatively simple
The proprietorship does not have to pay separate business income taxes
Easy to srart new business
The psychological satisfaction may
people get from being their own boss
Easy to get out of business
Disadvantages
The owner of the business has limited liability
The difficulty of raising financial capital
The size and efficiency of a proprietorship
The proprietor often has limited managerial
experience
The difficulty of attracting qualified employees
Limited life of the sole proprietorship
Formation
Register the business name with the local, state, or federal government.
Decide the name of the business
Obtain all the necessary business permits and licenses from the local, state, or federal government.
Examples
McDonalds
SubWay
KFC
Partnership
— a firm owned and controlled by two or more persons who are parties to a partnership agreement
Advantages
Ease of management
The lack of special taxes on a partnership
Ease of startup
Partnerships can usually attract financial capital more easily than proprietorships
The more efficient operations that come with their slightly larger size
Partnerships often find it easier to attract top talent than proprietorships
Disadvantages
A partner’s responsibility for the debts of the business is limited by the size of his or her investment in the firm
The partnership has limited life
The main disadvantage of the general partnership is that each partner is fully responsible for the acts of all other partners
The potential for conflict between partners
Types of Partnerships
General partnership- type in which all partners are responsible for the management and financial obligations of the business
Limited partnership - type where at least one partner is not active in the daily running of the business. Likewise, the limited partner only has limited responsibility for the debts and obligations of the business
Formation
Object of the partnership should be legal
Minor may be admitted to the benefits of partnership with the consent of all the partners
Partnership based on agreement
No consideration required for forming agency
Partnership based on agreement
Examples
Sony
Intel
Honda
Skype
Corporation
— a firm that is owned by a group of ordinary shareholders and the capital of which is divided up into a number of shares.
Disadvantages
The difficulty and expense of getting a charter
The owners, or shareholders, have little voice in how the business is run
The double taxation of corporate profits
Corporations are subject to more government regulation than other forms of business
Advantages
2.The corporation provides limited liability for its owners
The directors of the corporation can hire
professional managers to run the firm
The ease of raising financial capital
Unlimited life
The ease of transferring ownership of the
corporation
Formation
Selection of jurisdiction in which to incorporate
The corporate name
Preincorporation activities by promoters
Articles of incorporation
Post-incorporation activities: bylaws, corporate supplies, organizational meetings
Examples
Samsung
Google
Microsoft
Coca-Cola