Business organizations

Question 1

Business Organizations

Answer 1

The three major business organizations are sole proprietor, partnership, and corporation.

Question 2

Sole Proprietor

Answer 2

 One person
 Advantages – easy to start, full control, all profits
 Disadvantages – liability, responsibility, limited growth, lack of longevity
 Example – Jenny’s tanning salon

Question 3

Partnership

Answer 3

 Two or more people in business together
 Advantages – easy to start, specialization, shared decision making, shared losses
 Disadvantages – liability, conflict, lack of longevity
 Example – John and Hank attorneys at law

Question 4

Types of Partnership

Answer 4

o Limited – One person is a financial investor while the other partner runs the business (ex. Shark tank).
o General – own everything 50/50. The advantages and disadvantages listed below are of a General Partnership.

Question 5

Corporation

Answer 5

 An organization legally distinct (separate) from its owners
 Board of Directors – decision makers
 Articles of incorporation – application
 Corporation charter – license
 Finances – raises money through stocks or bonds. Stocks preferred because a bond is a loan.
 Advantages – limited liability, specialization, lasts a long time
 Disadvantages – expensive to start, government, slow decision making process
 A double disadvantage – profit from a corporation is taxed twice. Once as corporate profit, once
as a income for a stockholder (because of the dividend checks)
 Example – Coca Cola