Business Organizations

Megan Rees 2020

Starting a Business

When starting a business, one of the first things you need to
determine is what sort of business structure you are going to
have.

Business Structure: Refers to the organization of a

company in regards to its legal status.

This choice is based on the needs of

your business and what is most

appropriate at the moment. It can

change over time.

Megan Rees 2020

Business Structure Options

Sole Proprietorship

Partnership

LLC

Corporation

Megan Rees 2020

Business Structure Options

There are also two other structures that can also be a

corporation but are organized differently…

Franchise

Non-Profit

In this lesson we will discuss

all six structures, but
understand that most

franchises and non-profits
are ALSO corporations or

LLC’s.

Megan Rees 2020

Sole Proprietorship

Megan Rees 2020

Sole proprietorships that grew into corporations and
franchises

Partnership

Megan Rees 2020

•

Very similar to Sole but have more than one owner

•

Each partner contributes money, time, knowledge, skills, etc.

•

Business profits are split at the percentages agreed upon.

•

Still liable for debts of the company.

•

Can raise money easier because you have the assets of more than
one person.

Agreement to share a business,

combining resources and sharing risk.

Partnership

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Famous successful business partnerships:

Corporation

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•

Divide up ownership of the company among stock holders

•

Live beyond the lives of their founders

•

The company is run by a board of directors that make decisions for
the company.

•

Corporations file their own taxes—they are a separate entity

•

Less individual control, but more ability to raise money and grow

Have it’s own legal existence and is

owned by stockholders, not an

individual.

Corporation

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Most of the companies you are familiar with are
probably corporations.

Limited Liability Corp (LLC)

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This business type is a HYBRID of the partnership/sole model and
the corporation, taking advantages from each

•

It is it’s own entity like a corporation—your assets are protected

•

You maintain ownership, though for full benefits you need two
people

•

Choose to be taxed as either sole or corp.

Company is separate from owner but
not a full corporation that sells shares.

Limited Liability Corp (LLC)

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Many large companies that are still privately owned
and do not sell shares are LLC’s.

Franchise

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•

Corporations can choose to expand by allowing individuals to buy
and run a new location

•

Not all stores with multiple locations are franchises

•

Corporations take a proven method and duplicate it, with different
franchisee’s running the company

•

Less risk for the franchisee, but also less control over decisions

A proven company grants an individual the
right to open one of their stores in a new
location in exchange for a fee and royalties

Franchise

Megan Rees 2020

You probably go to franchises every week. They are
everywhere, especially in the food service industry.

Non-Profit

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•

Non-profits are tax-exempt or charitable—they do not pay income
tax on the money they receive for their organization.

•

They can operate in religious, scientific, research, or educational
settings

•

They do amass revenue—but they do not use it to become rich but
to grow their organization and pay their workers.

•

They can have paid staff that keeps the company running.

•

Operate under strict government rules.

The goal of a non-profit is NOT to make

money.

Non-Profit

Megan Rees 2020

Non-profits are either Community Serving or Member
serving.

• Charities
• Furthering a cause
• Educating the masses

Community

• Clubs
• Unions
• Societies
• Churches

Member

Multiple Choice

Takes the risk of disputes among owners, unequal work, and personal liability

Multiple Choice

Uses revenue only to grow business and possibly pay employees.

Multiple Choice

Great for people who want to run a business but not take as much risk with a new idea.

Multiple Choice

Easiest and cheapest to start, but with a great deal of personal liability.

Multiple Choice

Is a hybrid of two other structure types, taking advantages from each.

Multiple Choice

Each owner can specialize in their area of expertise, expanding the capabilities of the business.

Multiple Choice

Goal is to help others, work toward a cause, or support it’s members

Multiple Choice

Gets taxed twice – Income is taxed at the corporate level and the personal level

Multiple Select

Owners are not liable for the debts of the company.

Multiple Choice

Difficult to get loans and raise money to grow and expand the business.

Multiple Select

Owners ARE liable for the debts of the company

Multiple Choice

Business owner must pay a large fee and then royalties on profits.

Multiple Choice

Business owner must pay a large fee and then royalties on profits.

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