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