MIC - Business Organizations Lesson
Business Organizations
Three forms of business organization in the U.S. economy are sole proprietorships, partnerships, and corporations. Three types of businesses can be differentiated based on the number of owners, amount of liability, lifespan, decision-making authority, and how they are taxed.
Sole Proprietorships
- Number of owners: One
- Most common form of ownership
- Liability: The owner is responsible for all debts and legal obligations
- Unlimited liability means an owner may lose property like a home if debts cannot be paid
- Lifespan: Sole proprietorships are easy to start but will close when the owner quits, retires, dies, etc.
- Decision-making: Owner makes all decisions.
- Taxation: The owner pays taxes on their income; the business does not have to pay special taxes
Partnerships
- Number of owners: Two or more
- Liability: Depends on the type of partnership
- General partnership: partners share responsibility equally
- Limited partnership: only one partner has all the responsibility
- Limited liability partnership (LLP): All partners have limited liability
- Lifespan: Partnerships are easy to start but often end due to the potential for conflict between partners.
- Decision-making: Each partner shares decision-making and brings their own strengths and skills to the business.
- Taxation: Partners pay taxes on their share of the income; the business does not pay any special taxes.
Corporations
- Number of owners: Depends on the number of shareholders (people who own stock)
- Liability: Corporation may be sued or sue others; each shareholder has limited liability for corporation’s debts.
- Lifespan: Corporations have a long life as shares can be sold multiple times.
- Decision-making: Stockholders elect a board of directors, which makes all major decisions of the corporation.
- Most heavily regulated by the government
- Double Taxation: The corporation pays taxes on its income, and the shareholders pay taxes on the profit made from their shares of the corporation.
Business Organization Graphic Organizer Practice
Business Organization Vocabulary Practice
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