Business Organizations

Characteristics of Sole Proprietorship

-Single ownership

-No sharing of profits

-One man’s capital

-Unlimited liabilities

-One man control

Advantages:                                                            Disadvantages:

Easy to organize                                                      Limited ability to raise capital

Decisions can be made easily                                  Unlimited liability

Financial operations are not complicated                 Limited ability to expand

Characteristics of a Partnership

-Shared resources

-Mutual agency

-Unlimited liability

-Shared profits and losses

Advantages:                                                            Disadvantages:

Easy to form                                                              Limited ability to raise capital

Flexibility of operations                                             Unlimited liability to partnership debts

Expected to be more efficient than sole traders Limited life

Characteristics of a Corporation

-Separate legal existence

-Limited liability of stockholders

-Additional taxes

-Corporate management

Advantages:                                                            Disadvantages:

Public ownership                                                      Strict regulation

Limited liability                                                         Can be difficult/expensive to form

Ease of transferring ownership                               Income subject double - taxation