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Management (MGT)

Chapter 4: Understanding Legal Forms of Business Organization ORGANIZING OPTIONS (FORMS OF BUSINESS OWNERSHIP)  The Sole Proprietorship – Business owned by one person (considered extension of self – not separate legal entity) o Advantages  Freedom  Simple legal setup  Low start up costs  Tax benefits o Disadvantages  Unlimited liability – personal liability for all debts of the business  Lack of continuity (dissolves when owner dies)  Dependent on resources of one person (hard to get cash funding from others)  The Partnership – Two or more persons combine financial, managerial and tech abilities for the purpose of operating a business for profit  General Partnerships – Partnership n which all partners are jointly liable for the obligations of the business (All unlimited liability; Share all profit)  Limited Partnership – Partnership with at least one general partner (who has unlimited liability) and one or more limited partners. Limited partners cannot participate in the day to day management of the business or they risk the loss of their limited liability status. o Advantages  Ability to grow by adding talent and money  Easier to borrow funds  Ability to invite new partners to join by investing money  Simple legal setup  Partnership agreement o Disadvantages  Unlimited liability for general partnership (If other partner caused debt, other one still has to pay)  Lack of continuity (death; partnership dissolves)  Difficulty of transferring ownership (no partner can sell out without other partners consent)  Conflict b/w partners  The Corporatio
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