Business Organizations By: Gwyneth Labine

Sole Proprietorships


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.


Created with images by PublicDomainPictures - "abstract architecture background" • geralt - "boss executive businesswoman" • PublicDomainPictures - "connect connection cooperation" • sattysingh - "architecture building sky" • stevendepolo - "Money Hand Holding Bankroll Girls February 08, 20117" • crdotx - "Grow"

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