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.