Forms of Business Organization

Sole proprietorship partnership corporation

Sole proprietorship

Sole proprietorship bc involves no requirements except for business license and fees

-easy to start up -easy to manage (decisions, flexibility, no coowner) -owner gets all profits -exempt from business income tax -easy to get out of

-unlimited liability (owner is personally and fully responsible for losses and debts -hard to raise financial capital -size and inefficiency--may not be able to hire enough workers -limited life--business ceases to exist when owner dies or quits

Partnership

Easy to form, but formal legal papers are usually drawn up to specify arrangements between partners

1. easy to start up 2. easy to manage 3. exempt from business income taxes 4. easier to attract financial capital 5. larger size=more efficient 6. easier to attract skilled employees

1. each partner is fuly responsible for acts of other partners 2. when a partner dies or leaves, the partnership must be dissolved or recognized 3. potential for conflict is greater

Business organization recognized by law as a separate legal entity having all the rights of an individual

1. buy and sell property 2. enter into legal contracts 3. sue and be sued

Board of directors

Selling or issuing stock

Ownership of the corporation shares

Shares of stock are sold to investors, then the money is used to set up the corporatioin, profits paid to you as a shareholder are called dividends