forms of business organisations
DESCRIPTION
I prepared these slides for my Micro Economics class for presentation on the topic of "Types of Business Organizations".TRANSCRIPT
By: Junaid Inam
Group of People
Common Objective
Profit Maximization
Human Needs & Wants
Producing Goods
Providing Services
FORMS OF BUSINESS ORGANIZATION
FORMS OF BUSINESS ORGANIZATION
Three Organizational Forms developed by Business Owners
• Sole Proprietorship
• General Partnership
• Corporation
FORMS OF BUSINESS ORGANIZATION
DEFINITIONSDEFINITIONS
Sole Proprietorship Partnership Corporation
Any Business Owned and
Operated by an Individual
Two or More Persons
Operating a Business for a
Profit
Legislatively Created and Regulated
Governance, Ownership and
Financial Structure
FORMS OF BUSINESS ORGANIZATION
FORMATIONFORMATION
Sole Proprietorship Partnership Corporation
No Formalities or Legal
Documentation; May be Implied from Conduct or
Actions
Written or Oral
Agreement or May be
Implied from Conduct or
Actions
Filing of Articles of
Incorporation with Secretary
of State and Payment of
Fees
FORMS OF BUSINESS ORGANIZATION
GOVERNING DOCUMENTSGOVERNING DOCUMENTS
Sole Proprietorship Partnership Corporation
None Required
None Required; Most have Agreement specifying
Rights, Duties and Obligations
Articles of Incorporation
create Corporation;
Bylaws prescribe its Operation
FORMS OF BUSINESS ORGANIZATION
NATURE OF OWNERSHIPNATURE OF OWNERSHIP
Sole Proprietorship Partnership Corporation
Wholly Owned by
Single Individual
For Contribution, Partner receives Proportionate
Share of Profits/Losses and
Partnership Property
Residual Claim on Corporate Equity and Right to Vote for Directors and Essential Governance
FORMS OF BUSINESS ORGANIZATION
LIABILITYLIABILITY
Sole Proprietorship
Partnership Corporation
Sole Proprietor Personally
Liable for All Debts and
Obligations
Partners are Jointly and Severally Liable for all Partnership
Obligations, in Contract and in
Tort
Shareholder’s Liability limited to Extent of Capital Contribution [Limited Liability]
FORMS OF BUSINESS ORGANIZATIONTAXATION
Sole Proprietorship
Partnership Corporation
Not a Taxable Entity; Income
(Loss) passes through to
Sole Proprietor
Partnership not a Taxable Entity; Allocations of
Income and Loss allowed within
Partnership before Pass-
Through
Corporation taxed as Separate Entity & Dividends/Capital Gains also Taxed [Double Taxation]
FORMS OF BUSINESS ORGANIZATION
MANAGEMENTSole
ProprietorshipPartnership Corporation
Sole Proprietor has
Complete Management
Control
All Partners have Equal Rights in Partnership’s
Management and Conduct
Managed by B.O.Ds elected by Shareholders; Board may Delegate Authority to Appointed Officers
FORMS OF BUSINESS ORGANIZATION
TRANSFER OWNERSHIP INTERESTS
Sole Proprietorship
Partnership Corporation
Sole Proprietorship
not Transferable; Property and Products are Transferable
Limited Right of Transfer subject to
Consent by all Partners
Freely Transferable
through Formal and Informal
Capital Markets
FORMS OF BUSINESS ORGANIZATION
WITHDRAWAL OF OWNER
Sole Proprietorship
General Partnership
Corporation
Terminates Sole
Proprietorship
Partner Death or Withdrawal may Terminate
Partnership
Corporation has Unlimited Life
Ease of formation and dissolution.
low start-up costs and low operational overhead.
Ownership of all profits.
Tax benefits
Decision making
Limited resources
Unlimited liability
Limited life
Difficulty in raising capital
Easy formationLarge resources
Borrowing FacilitiesSharing of risk
Combined Abilities
Unlimited liabilityLimited life
Limited capitalLack of harmony
Profit Sharing
Greater flexibility in raising capital
Ease of transferring ownership
Unlimited commercial life
Limited liability
Fees
Paperwork
Double taxation
Regulatory restrictions.
Higher organizational and operational costs.
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