organization and management a new business must be organized in a way that will help it produce...

Organization and Management

A New business must be organized in a way that will help it produce goods effectively and efficiently.

Businesses are organized in 3 basic ways.

1. Sole Proprietorship

2. Partnership

3. Corporation

Sole Proprietorship

Is a business that one person or a married couple own by themselves.

The one person or married couple share income, profits, assets and risks.

What are risks?

Sole Proprietorship

Almost always small businesses few individuals can afford to start a large business.

Examples- newsstands, gas stations barbershops, lawncare

Sole Proprietorship-Advantages

They are their own bosses.

They receive all the profit.

They set their own hours.

Sole Proprietorship-disadvantages

Owner must provide all the cash.

Owner must take all the risks.

If their business fails they lose all the money they put into it.

Partnerships

Is a business that two or more people own. Lawyers often form partnerships

Partnership

Usually small businesses but larger the sole proprietorships.

Why set up Partnerships?

To pool their capital because individually they do not have enough money to start a business.

Combine different skills.

Share workload.

Partnerships

Share profit and financial risks.

Partners usually sign a written agreement that spells out responsibilities of each partner.

Disadvantages of a partnership

Disagreements

It can be complicated if the partners have a falling out and one wants to end the partnership.

Corporations

Is a large business that has many owners.

Corporation

Starting a large business requires more money then most individuals can afford. (read 437)

Stock is the shares of ownership in a corporation.

Stockholders are the people that buy the stock.

Corporation

When you buy stock in a partnership you are gambling to the corporation will make money.

Corporation

Common Stock- a share of a corporation that pays its owner a dividend if the corporation makes a profit.

Dividends-

A share of profit paid to stockholders of a corporation.

Preferred Stock

Stock that earns a fixed amount each year the corporation makes a profit.

Advantages of Corporations

A great many people share the risk

They have limited liability you only lose what you invested.

If owner dies corporation continues.Read 439