Chapter 5: Options for organizing business. Learning objectives of this chapter include: Define and examine the advantages and disadvantages of the sole proprietorship form of organization; identify three types of partnership and evaluate the advantages and disadvantages of the partnership form of organization; describe the corporate form of organization and cite the advantages and disadvantages of corporations; define and debate the advantages and disadvantages of mergers, acquisitions, and leveraged buyouts. | Chapter Five Options for Organizing Business The Three Basic Types of Business Organizations The Sole Proprietorship: Bill’s Barber Shop The Partnership: Johnson & Wiley, CPA’s The Corporation: Boeing, Microsoft Comparison of Sole Proprietorships, Partnerships, and Corporations Source: . Bureau of the Census, Statistical Abstract of the ., 2000, 120th edition (Washington,DC: . Government Printing Office, 2000), p. 535. Sales ($billions) Net Income ($billions) Number Corporations Proprietorships Partnerships The Sole Proprietorship A business owned and operated by one individual. Advantages and Disadvantages of the Sole Proprietorship Advantages Ease and cost of formation Secrecy Distribution and use of profits Control of the business Government regulation Easy to close the business Disadvantages Unlimited liability Limited sources of funds Limited skills Lack of continuity Lack of qualified employees The Partnership An association of two or more persons who carry on as . | Chapter Five Options for Organizing Business The Three Basic Types of Business Organizations The Sole Proprietorship: Bill’s Barber Shop The Partnership: Johnson & Wiley, CPA’s The Corporation: Boeing, Microsoft Comparison of Sole Proprietorships, Partnerships, and Corporations Source: . Bureau of the Census, Statistical Abstract of the ., 2000, 120th edition (Washington,DC: . Government Printing Office, 2000), p. 535. Sales ($billions) Net Income ($billions) Number Corporations Proprietorships Partnerships The Sole Proprietorship A business owned and operated by one individual. Advantages and Disadvantages of the Sole Proprietorship Advantages Ease and cost of formation Secrecy Distribution and use of profits Control of the business Government regulation Easy to close the business Disadvantages Unlimited liability Limited sources of funds Limited skills Lack of continuity Lack of qualified employees The Partnership An association of two or more persons who carry on as co-owners of a business for profit. Types of Partnerships General partnership: Partners completely share in the management of the business. Limited partnership: One general partner with unlimited liability and one limited partner with limited liability. Joint venture: A partnership established for a specific project or a limited time. Advantages and Disadvantages of Partnerships Advantages Ease of organization Availability of capital and credit Combined knowledge and skills Decision making Regulatory controls Disadvantages Unlimited liability Business responsibility Life of the partnership Distributions of profits Limited sources of funds Taxation The Corporation A legal entity created by the state, whose assets and liabilities are separate from its owners. The Board of Directors The Stockholders The Articles of Incorporation Name and address of the corporation Objectives of the corporation Classes of stock (common, preferred, voting, nonvoting) and the number of shares for each class of .
