Business Structures

Dominick Miller- Business Ownership Assignment

Sole Proprietorship

Characteristics:
  1. Sole Proprietorships can only have one owner
  2. The owner can run the business however he/she wants.
  3. A Sole Proprietorship is a very simple style of business and is very flexible to work with.
  4. The owner has authority over making the decisions when it comes to policies, profits, and capital investment.


Advantage:

Sole Proprietorships are easy to set up. You do not need to file business formation paperwork with a state agency before operating, like corporations and LLC's do. Filing this paperwork can take forever to be approved by the government, but sole proprietorships can engage in business activity without filing this paperwork.


Disadvantage:
Sole Proprietorships have unlimited reliability. The owner has full responsibility for everything that happens to the business. Which means, the owner's personal assets can be taken by creditors if the owner is in debt and cannot pay the bills of the business.


Example:

PersoNELLized Cakes & Café (in Carbondale, PA)


Interesting Facts:

  • Between 1990 and 2008, the number of sole proprietorships that filed tax returns increased from 15 million to 22.5 million.
  • The total net income in 2008 of the 22.5 million proprietorships in the US equaled to approximately 265 billion dollars.
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Partnership

Characteristics:
  1. Two or more individuals that carry on a business for shared profit
  2. There are different types of partnerships available based on the owners’ specific wants or needs. General Partnerships, Limited Partnerships, and Limited Liability Partnership (LLC).
  3. Partnerships require a partnership agreement that will include information about the partners, their duties and responsibilities in the business, how income will be shared, criteria for investments and withdrawals, and other information.
  4. Mutual Agency holds both partners accountable for all of the decisions that are made for the business


Advantage:

When there is more than one owner, there is an increased ability to raise funds for your business.


Disadvantage:

Partnerships can be unstable because there is always the possibility of suspension if one partner withdrawal from the business or passes away.


Example:

Lenahan & Dempsey Law Firm


Interesting Facts:

  • The total net income for all partnerships in the U.S. decreased by 33%: from $683 billion to $452 billion.
  • Partners in real estate accounts for 47.3% of all partnerships

Corporation

Characteristics:
  1. A corporation is a legal entity that has its own rights and obligations.
  2. Stockholders are owners of a corporation, and the buying and selling of shares can transfer ownership of the corporation.
  3. There is a limited liability for the owners, and these stockholders are not reliable for the corporations debts or actions. Shareholders are only liable up to unpaid amounts of their shares
  4. A management system is still used in order to oversee the day to day operations of the corporation.


Advantage:

A corporation can last for an indefinite period of time, meaning it may have an endless life as long as there is a continuous succession of employees, shareholders, managers, and debtors.


Disadvantage:

Forming a corporation is an extremely difficult process because it requires registration with the central regulatory authority and listing on a stock exchange. This also consists of a fulfillment certain requirements related to the amount of capital, number of directors, etc. in order to


Example:

Microsoft


Interesting Facts:

  • Between 2002 and 2011, Microsoft's net income increased from $5.36 billion to $23.15 billion.
  • So far this year, Microsoft has spent about $12 million on research and development, which is already more than what was spend in 2014 at $11,381
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Franchise

Characteristics:
  1. A franchise is an authorization granted by a company to an individual or group, enabling them to carry out specified commercial activities.
  2. There are two different types of franchising relationships, Business Format Franchising and Traditional or Product Distribution.
  3. Business Format Franchising is when a franchisor provides a franchisee an entire system for operating the business, including its trade name, products, services, site location, operating manuals, training, brand standards, quality control, marketing support and business advisory support.
  4. Traditional or Product distribution focuses more on the products manufactured or supplied by the franchisor or franchisee. These products need pre- and post-sale services. Examples include bottling, gasoline, and automobile manufacturers


Advantage:

Opening a franchise can increase your chances of success because you are selling proven products and methods.


Disadvantage:

Opening a franchise is very expensive, and franchisees are required to operate under the procedures and restrictions formed by the franchisor, including the products that can be offered, pricing, and the location of the franchise


Example:

Dunkin' Donuts


Interesting Facts:

  • It costs $750,000 to open up a Dunkin' Donuts franchise
  • Since 2007, Dunkin Donuts has opened 3,322 franchises internationally and in the U.S.
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Not-For-Profit Organization

Characteristics:
  1. A not-for-profit organization is an organization that does not receive profits for its owners, and all profit is used towards pursuing an organization's mission.
  2. The main goal of a not-for-profit organization is to provide service to a specific group of people or for the public.
  3. Normally, these organizations do not manufacture or sell goods, and may not have credit transactions.
  4. Sources of their income usually are from subscriptions from their members' donations, grants-in-aid, and income from investments.


Advantages:

Not-for-profit organizations are usually exempt from paying taxes.


Disadvantages:

The public is allowed to receive copies of the organization's state and federal filings of its finances to learn about all of its salaries and expenditures.


Example:

Neighbor Works of Northeastern Pennsylvania


Interesting Facts:

  • There are roughly 1.5 million not for profit and nonprofit organizations in the US
  • About 62% of all hospitals in the US are nonprofit organizations