Business Organizations

By Nicholas Skierkowski

Sole proprietorship

*Simplest and most common type of business operation in the United States today

*One Owner who makes all business decisions

*Business profits do not have to be shared with any other owner

*Unlike other business types, sole proprietorships do not have to file separate income tax returns.


Advantage: Simple and inexpensive to open

Disadvantage: A sole proprietorship does not have the liability protection that a corporation offers.

* Makes all decisions and directly affects the success of the business.

* Ultimate responsibility of owner to invest funds in the business


Example: Rosario's Pizzaria

Partnership

*Two or more persons

* Sharing of profits and losses

*The very basis of partnership business is good faith and mutual trust

*Mutual contribution of money, property, or industry


Advantage: Easy to set up

Disadvantage: Earnings are split- ultimate liability

*Companies can split up work making jobs quicker and more efficient

*More and better ideas to make products better, achieve more, and make more money.


Example: Everything Natural (in the Summit)

Franchise

*Appear in many industries like real estate, fast food, hotels, and retail

*Two types of franchises

*Franchisors offer assistants to franchises to help grow there business

*Owner/operators do not have to start from the ground up

Advantage: Franchises help business owners be in business for themselves without starting a business from the ground up.

Disadvantage: The initial franchise fee can be expensive

* 1 in 12 business establishments is a franchise

*A new franchise opens every 8 minutes of every business day

*Top franchise business industry is fast food


Example: McDonalds

Non-For-Profit organization

*Non-profit organizations do not view profit as a principle goal

*No ownership structures, exist by the public for a common good

*The oversight of non-profit organizations remains with the board of directors or trustees.

*Required by law to file annual reports with their state and tax returns with the IRS.


Advantage: Personal gratitude and the aid to society

Disadvantage: Participants do not make money, if so very little

*In 2013 public charities reported over 3 trillion in assets

*Protection from personal liability


Example: ASPCA

Corporation

*There is no connection between the life of a corporation and that of its members

*Limited liability

*Dominate the U.S economy

*Provides a way for individuals to run a business and to share in profits and losses


Advantage: Corporations have full legal capacity to enter into a contractual agreement on their own behalf.

Disadvantage: Corporate level tax

*Most large corporations select Delaware as their state of incorporation because of its sophistication in dealing with corporation law.

*A promoter will often start a corporation in getting capital, financing, etc.


Example: Uline