Business Organization Notes
Sole Proprietorship:
 business owned and run by one person
1. most numerous and smallest
2. easy to set up – licenses and fees by government
Strengths:
1. easy to start
2. ease in management
3. enjoy the rewards without having to share them with someone else
4. business does not have to pay income taxes because it is not a separate legal entity
5. personal freedom in being the boss
6. ease of getting out of the business – business just dies
Weaknesses
1. unlimited liability – owner is responsible for all debts and losses (law suits)
2. difficult in raising capital
3. inventory and labor may be very costly
4. proprietor has limited managerial experience
5. difficult attracting qualified employees (may want benefits that the company is not
willing to offer)
6. limited life – if owner dies, quits, sells the business, the business no longer exists
Partnership:


business owned by two or more persons.
has many of the same strenghts and weaknesses as a sole proprietorship
Types of partnership
1. general partnership – all partners are responsible for the management and financial
obligations of the business
2. limited partnership – one partner is not active in the daily running of the business
even though he/she may have contributed monetarilty to the business.
Strengths
1. easy to establsi9h
2. easy to manage
3. lack of special taxes – has to submit a special schedule to IRS on profits
4. attract some financial capital
5. slightly larger
6. easier to attract talent
Weaknesses
1. each partner is responsible for the acts of the other partners
2. limited partner has limited liability – investor’s responsibility is limited by the
amount invested in the firm
3. limited life
4. conflict between partners
Corporations:
 separate legal entity having all the rights of an individual; right to buy and sell property, enter
into legal contracts, sue and be sued