Ch. 26: Forms of Business Organizations

Main Forms of Business Organization

3 Main Forms of Organization:

• Sole Proprieterships

• Partnerships

• Corporations​

Sole Proprietorships:

-most flexible & easiest to start​

-One person owns all its assets and has full personal liability for all debts

-unlimited control of the business & all its profits​

-most common​

​

Partnerships

-Association of two or more persons, as coowners, to carry on a business for profit

​

-General partnership (partners share all profits/losses equally)​

Corporations

-Legal entity or artificial person that is created by or under the authority of the laws of a state

​

-Completely seperate from the person who owns/runs it (therefore the corporation makes or loses money)​

Multiple Choice

Which form of ownership involves two or more owners splitting profits/losses equally?

• Sole proprietorships

• Partnerships

• Corporations

Multiple Choice

Which is the most common form of business?

• Sole proprietorships

• Partnerships

• Corporations

Multiple Choice

Which form of ownership is completely separate from the person that owns it?

• Sole proprietorships

• Partnerships

• Corporations

26-2: Creation & Termination of Partnerships

​General Partners

-General Partnership: all partners assume full liability for debts of the firm

-Silent Partner: partner known to the public but takes no active managerial role

​-dormant partner: not known to the public or active in management

-Secret Partner: ​partner not known to the public but active as a manager

-​

Limited Partners:

-Limited Partnerships: consits of at least one general partner w/ full personal liability & at least one limited partner

​

-Limited Partner: partner whose exposure to liability cannot exceed the amount of capital the partner has invested in the business as long as the partner does not participate in the managerial control of the business​

​Joint Venture

-​formed when two or more firms combine resources and skills for one complex project

Open Ended

What is the difference between a partnership and a joint venture?

Open Ended

What is the difference between a general partner and limited partner?

​Reasoning for Termination

1. Agreement by the partners

2. Operation of Law (Death or bankruptcy)

3. Court Decree (1 partner has become insane, incapacitated, guilty of serious misconduct)