A business owned and run by a single individual. It is the easiest form of business to start because it involves almost no requirements except for occasional business licenses and fees.
- Easy to start up.
- Management is relatively simple.
- Decisions do not require approval from a Co-Owner, Boss, or other "Higher-Up".
- Owner can keep the profits of successful management without having to share them with other owners.
- Proprietorship does not have to pay separate business income taxes because the business is not recognized as a separate legal entity.
- Psychological satisfaction people get from being their own boss.
- Easy to get out of business.
- Owner has unlimited liability.
- Difficulty of raising a financial capital.
- Size and efficiency.
- Often has limited managerial experience.
- Difficulty of attracting qualified employees.
- Limited life.
A business that is jointly owned by two or more persons.
- General Partnership- All partners are responsible for the management and financial obligations of the business.
- Limited Partnership- At least one partner is not active in the daily running of the business.
- Ease of startup.
- Ease of management.
- Lack of special taxes.
- Can usually easily attract financial capital.
- More efficient operations that come with their slightly larger size.
- Often find it easier to attract top talent.
- Each Partner is fully responsible for the acts of all other partners.
- Limited life.
- Potential for conflict between partners.
A form of business organization recognized by law as a separate legal entity with all the rights of an individual.
- Ease of raising a financial capital.
- Limited liability for its owners.
- Directors or the corporation can hire professional managers to run the firm.
- Unlimited life.
- Ease of transferring ownership of the corporation.
- Double taxation of corporate profits.
- Difficulty and expense of getting a charter.
- Owners or shareholders have little voice in how the business is run.
- Subject to more government regulation.
Growth Through Reinvestment
- Income Statement- A report showing a business's sales, expenses, net income, and cash flows for a period of time.
Estimating Cash Flow
- Net Income- Funds left over after all of the firm's expenses, including taxes, are subtracted from the sales
- Depreciation- Non cash charge the firm takes for the general wear and tear on its capitol goods.
- Cash Flow- Sum of net income and non cash charges.
Growth through Mergers
- When two companies merge, one gives up its separate legal identity.
Types Of Mergers:
- Horizontal Merger- When firms the produce the same kind of product join forces
- Vertical Merger- When companies involved in different stages of manufacturing or marketing join together.
- A firm that has at least 4 businesses each making unrelated products and is responsible for most of its sales.
- Corporation that has manufacturing or service operations in a number of different countries.