Sole Proprietorships
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A business that is owned and managed by a single
person.
The most common type of business in the US.
(70% of American businesses)
Sole Proprietorships generate less than 5% of all
sales in American business.
Sole Proprietorships
Advantages:
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Relatively easy to open or close.
There are few regulations.
Owners have freedom and near total control of
their business
Owners keep all the profits.
Sole Proprietorships
Disadvantages:
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Limited funding: startup cost fall completely on the
owner.
Limited Life- the business ceases to exist if the
owner leaves, dies or retires.
Unlimited Liability- owners are totally responsible
for all losses, debts and claims against the
business.
Sole Proprietorships
Examples:
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Edmonson’s Barber Shop on hwy 31
Wayne’s Produce
Lovett Woodworking
Partnerships
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A business that is co-owned by two or more
people.
Partners are often responsible for different aspects
of the business.
There are three different types of Partnerships.
Partnerships
Type 1: General Partnerships
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Where partners share responsibility for managing
the business and each partner is liable for all
debts and losses.
Partnerships
Type 2: Limited Partnerships
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When at least one partner is not involved in the
day-to-day running of the business and is only
responsible for the money they have invested.
This person is basically an investor.
Partnerships
Type 3: Limited Liability Partnership
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Where partners are limited partners and not
responsible for the debts and liabilities of the other
partners.
Partnerships
Advantages:
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Easy to open and close
Few regulations
Access to the resources of the other
partners
Partnerships
Disadvantages:
- Unlimited liability (most partnerships)
-
Potential for conflict
Limited life
Corporations
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A business owned by individuals (shareholders)
that own the rights to the company’s profits, but
face limited liability of the company’s debts and
losses.
Shareholders acquire ownership through the
purchase of stock; shares of the corporation.
Corporations
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As a stockholder your
only risk is the amount of
money that you have
invested in the company,
not for any debts that the
company may have
acquired.
Some stocks pay
dividends or parts of the
profits given directly to
the share holder.
Corporations
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A public company allows anyone to buy their
stock, while a private company retains control over
who can buy or sell the stock.
Corporations
Advantages:
-
Access to resources
Professional management
Limited liability
Unlimited life (business will continue regardless of
who enters and leaves)
Corporations
Disadvantages:
High start-up cost
- Heavily regulated by the government
- Double taxation (yikes!)
- Potential loss of control
-
Other Good Stuff
Horizontal Merger:
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The joining of companies that offer the same or
similar goods or services.
Vertical Merger:
- Companies that combine who offer several different
steps of production of a product or service.
* More on next Slide
Horizontal vs. Vertical
Horizontal Example:
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Standard Oil/ John Rockefeller
Vertical Example:
- Carnegie Steel/ Andrew Carnegie
More Good Stuff
A conglomerate is a merger of companies that
produce unrelated products or services. Examples:
- Colgate-Palmolive Company
- AT&T bought out Direct TV.
Through growth, an enterprise can become a
multinational corporation which means it have several
branches in several different countries. Examples:
- McDonalds
- Wal-Mart
Classroom Activity
Yay! Listen to Mr. Lovett while he explains
what you will be doing in class for the next
two days.
Hey, that’s me! >
Resources
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Meek, Morton and Shug, M. (2011). Economics: Concepts and Choices. Orlando, Florida: Holt
McDougal.
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