8-1: SOLE PROPRIETORSHIPPPT Notes

Business Organization

Definition: enterprise that produces goods or provides services in order to make a profit

Sole Proprietorship

Definition: business owned and managed by one person Account for more than 70% of

all businesses in the U.S. Generate less than 5% of all

sales

Advantages of Sole Proprietorships1. Easy to open and close

Requires money, license, permit, and registered name

2. Few regulations

Advantages… (continued)

3. Freedom and control 1 person makes the decisions

4. Owner keeps profits

Disadvantages of Sole Proprietorships

1. Limited funds/money2. Limited life3.Unlimited liability

Owner is responsible for all financial aspects of the business

8-2: FORMS OF PARTNERSHIPS

Partnerships

Definition: a business co-owned by 2 or more people who agree on how responsibilities, profits, and losses are divided

Types of Partnerships

General partnership: partners share management of the business Each partner is liable for all

business debts/losses

Types of Partnerships (continued)

Limited partnerships: partnership in which 1 person is not actively involved in the day-to-day running of the business This partner is only liable for

what he/she has invested

Types of Partnerships (continued)

Limited liability partnership (LLP): all partners are limited partners Not responsible for the debts

and liabilities of the other partners

Types of Partnerships (continued)

Not all businesses can register as LLP’s

LLP’s usually include medical partnerships, law firms, and accounting firms

Advantages of Partnerships

1. Easy to open and close2. Few regulations3. Access to resources (money)

Advantages of Partnerships (continued)

4. Joint decision-making5. Specialization

Each partner may bring specific skills to the business

Disadvantages of Partnerships

1. Unlimited liability Partners are responsible for all

of the business’s debt2. Potential for conflictCaused by more than 1 person

making decisions

Disadvantages of Partnerships (continued)

3. Limited life When a partner dies, retires, or

leaves, the partnership ends

Questions 1. Explain how a sole proprietorship

rests on the principles of free enterprise.

2. If you were looking to form a partnership, what traits would you want in a partner? Name 5 traits (and no…good looking doesn’t count).

3. Ideally, would a major retail or manufacturing business work as a partnership? Explain why or why not.

4. Name 2 types of businesses that would thrive as sole proprietorships.

5. Name 2 types of businesses that would thrive as partnerships.