A Basic Business Reader,Chapter 2 Forms of Business Ownership (1),Objectives,After studying this chapter you will be able to: Understand the nature of sole proprietorships and partnerships. Describe the advantages and disadvantages of sole proprietorships. Describe the advantages and disadvantages of partnerships.,Forms of business ownership,Sole Proprietorships,What is a sole proprietorship? A sole proprietorship is a business owned by one person. It is a typically small business. - restaurants - beauty parlors - flower shops - newsstands,Advantages of a sole proprietorship,Easy to start and easy to close. Direct and complete control. Greater motivation. Easy to keep trade secrets. Fewer and lower taxes (compared with incorporated companies).,Disadvantages of a sole proprietorship,Unlimited liability all of owners assets are potentially at risk. Limited sources of funds. Limited management skills.,Partnerships,What is a partnership? A partnership is a business owned by two or more persons. It has 3 basic types: general partnership, limited partnership, and joint venture.,Three types of partnership,1. General partnership All partners have unlimited liability. 2. Limited partnership at least 1 general partner + at least 1 limited partner (who does not participate in the management of the business) 3. Joint venture established for a specific project,Advantages of a partnership,Easy to start or organize. Partners may specialize in different areas of business management. Additional capital injected by each partner. Losses shared between the partners. Incentive for key employees.,Disadvantages of a partnership,Unlimited liability. Profits are shared. Short length of life in the event of the death of one of the partners. All partners are bound by the decision of any one of them - owner conflict; Difficulty in withdrawing.,Workshop,Presentation work Tell people how you plan to start a small business after you graduate. Discussion topic Compare a sole proprietorship with a partnership and discuss their respective advantages and disadvantages.,