Business Organizations
(Includes Sole Proprietorship, Partnership, and Corporation)
Sole Proprietorship
the simplest business form under which one can operate a business. The sole proprietorship is not a legal entity. It simply refers to a person who owns the business and is personally responsible for its debts.
Ex. Chick-fil-A
Partnership
is the relationship existing between two or more persons who join to carry on a trade or business. Each person contributes money, property, labor or skill, and expects to share in the profits and losses of the business.
Ex. Warner Bros
Corporation
is an independent legal entity owned by shareholders. This means that the corporation itself, not the shareholders that own it, is held legally liable for the actions and debts the business incurs.
Ex. ABC (Network)
Important Definitions
Limited Liability
is where a person's financial liability is limited to a fixed sum, most commonly the value of a person's investment in a company or partnership. If a company with limited liability is sued, then the plaintiffs are suing the company, not its owners or investors.
Unlimited Liability
refers to the legal obligations general partners and sole proprietors because they are liable for all business debts if the business can't pay its liabilities.
Stock
a type of security that signifies ownership in a corporation and represents a claim on part of the corporation's assets and earnings.
Dividend
a distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders.
Board of Directors
is a body of elected or appointed members who jointly oversee the activities of a company or organization.
Which Business Type Is The Most Common?
Sole Proprietorship