FORMS OF BUSINESS ORG

• Business


  Also known as an enterprise, agency. An entity involved in the provision of goods and/or services to consumers in exchange for other goods, services or money. Can refer to a particular organization or to an entire market sector.
• Business


  • The goal is for sales to be more than expenditure resulting in a profit
• Types of businesses


  • Manufacturing businesses
  • Service businesses
  • Financial businesses
  • Transportation business
  • Utilities businesses
• Manufacturing businesses


  • Agriculture and mining business
  • Manufacturers
  • Real estate business
  • Information business
• Service businesses


  Offer intangible goods or services, typically charge for labor or other services
• Financial businesses


  Businesses that generate profit through capital management
• Transportation business


  Deliver goods and individuals to their destination for a fee
• Utilities businesses


  Produce public services
• Forms of business organization

  • Sole Proprietorship
  • Partnership
  • Corporation
  • Cooperative
• Sole Proprietorship


  A business owned by one person who operates it for their own benefit
• Sole Proprietorship


  • Easiest and least expensive form of ownership
  • Sole proprietors are in complete control and can make decisions as they see fit
  • Owners receive the entire profit
  • Easy to quit the business if the owner decides to do so
  • Provides personal satisfaction, prestige and a sense of accomplishment
• Sole Proprietorship


  • Have unlimited liability and are legally responsible for all debts against the business
  • Burden of sole responsibility
  • Limited potential for growth
  • Difficult to attract qualified employees
  • Short life span dependent on owner's health and competence
• Partnership


  A business owned by two or more people who contribute money, property, labor or skill with the intention of dividing the profits among themselves
• Types of Partnership


  • General Partnership
  • Limited Partnership/Partnership with Limited Liability
  • Joint Venture
• General Partnership


  • Partners divide responsibility for management and liability for profit or loss according to their internal agreement or assumed equal if there is no agreement
• Limited Partnership/Partnership with Limited Liability


  • Most of the partners have limited liability (up to the extent of their investment)
• Joint Venture


  • Acts like a general partnership, but is clearly for a limited period of time or a single project
• Partnerships


  • Easy to form, small amount of money to start and operate
  • Liability to raise funds may be increased with more than one owner
  • Specific duties may be assigned to different partners
  • Losses will be shared between/among partners
  • Decision making is shared, making more informed decisions
• Partnerships


  • Partners are jointly and individually liable for the actions of the other partners
  • Profits must be shared with others
  • Disagreements can occur since decisions are shared
  • May have limited life, ending upon the withdrawal or death of a partner
• Corporation


  A business organized under laws and is separate and distinct from its owners
• Corporation


  • Shareholders have limited liability for the debt or judgments against the corporation
  • Shareholders can only be held accountable for their investment in the stock of the company
  • Corporations can raise additional funds through the sale of stocks
  • It has a life independent of the owners
• Corporation


  • Process of incorporation requires more time and money than other forms of organization
  • Monitored by government and local agencies, resulting in more paperwork to comply with regulations
  • Slow in decision making since there is a chain of command
• Cooperative


  A limited liability business that can organize for profit or non-for-profit, where members, not shareholders, have decision making authority
• Cooperative


  • Owned by a group of individuals and operated for their mutual benefit
  • All members have an equal say
  • Open and voluntary membership
  • Limited interest on share capital
  • Surplus is returned to the members according to amount of patronage
• Cooperative


  • Generally inexpensive to register
  • Owned and controlled by members
  • Members have equal vote at general meetings regardless of their level of investment
  • All members must be active in the cooperative
  • Limited liability
• Cooperative


  • Entails longer decision-making process
  • Requires members to participate for success
  • Less incentive, possibility of conflict between members
  • Difficult to attract potential members
  • Extensive record keeping is necessary
  • Requires ongoing education program for members
• Major Activities


  • Purchasing
  • Management
  • Accounting
  • Selling
  • Advertising