This is to help you with your high school economics class. :)

2. WHAT ARE THE ADVANTAGES OF ESTABLISHING
A SOLE PROPRIETORSHIP?
Sole proprietorship: a business owned by one person
One advantages of a sole proprietorship is that there is ease at starting the
business. They require a fairly light amount of legal work and financial
capital at startup.
Another advantage is full control. With sole ownership, it’s easier to solve
problems quickly and take advantage of opportunities. If there are too
many workers it’s easier to fix it.
The third advantage is profit. The owner keeps all profit earned. When it
isn’t a sole proprietorship, the owner has to share benefits and profits
earned with the other owner.
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3. WHAT ARE THE DISADVANTAGES OF
ESTABLISHING A SOLE PROPRIETORSHIP?
With great freedom to own a business by yourself, comes great
responsibility.
Unlimited liability: sole proprietors are fully responsible for the debts and
paying for the business to stay in tact.
Sole responsibility: At first, sole owners will have to do all the dirty work.
Accounting, advertising, market analyzing and cleaning.
Limited growth: due to collateral, which is anything of value to repay the
bank with if you are unable to keep the business going, the amount of
money sole owners can borrow is limited.
Lack of longevity: longevity is the amount of time the business operates. It
is limited in sole proprietorships because they depend on one person,
who can become sick, give up on the commitment and/or not be as
competent about how running a business works.
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4. HOW DO GENERAL PARTNERSHIPS AND
LIMITED PARTNERSHIPS DIFFER?
In general partnerships, both of the owners make business decisions and
have unlimited liability.
Whereas in limited partnerships, there is one owner who gets financial aid
from investors. In limited partnerships there is limited liability.
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5. WHAT ARE THE ADVANTAGES OF ORGANIZING A
PARTNERSHIP?
Just like in sole proprietorship, there is ease of startup. There is limited
government interference and to prevent trouble in the partnership later,
the partners write an agreement.
In a partnership, there is specialization. One partner could handle some
responsibilities, while the other handles the left over responsibilities.
Shared decision making makes it easier on both partners. Shared decision
making makes it to where the business owners can minimize the
amount of mistakes by consulting with each other.
Shared business loss makes it easier on both because neither of them lose
as much as they would’ve if they were sole business owners. Creditors
are more likely to make bigger loans to partnerships than they would to
sole proprietors.
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6. WHAT ARE THE DISADVANTAGES OF
ORGANIZING A PARTNERSHIP?
In general partnerships, there is unlimited liability which is dangerous
because it can lead to an overall crash in their personal and business
budgets. Also, if one person refuses to pay their dues, the rest have to
pick up the slack and pay it for themselves.
The potential for conflict is much greater in partnerships. Owners can have
personality clashes, different management styles, disagreements, and
poor communication to each other.
Lack of longevity is a problem in partnerships because partnerships can
have problems and one owner might not be able to take it anymore and
want to leave. Also, If one person leaves a 3 person partnership, then
the other two have to find another person who can and will assume the
responsibilities of the one that left.
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7. HOW IS A CORPORATION FORMED AND WHAT ARE THE
CHARACTERISTICS OF A CORPORATION?
Corporation: a business that acts like an individual.
Corporations are able to own property, hire people, make contracts, sue, be
sued, pay taxes, and make and sell products.
Has to have a license, articles of incorporation and corporate charter, which
grants the formation of a corporation.
Has a hiring tree…owners > board of directors > corporate officers > vice
presidents > department heads > employees
Raise funds by selling stock which is split into portions called shares.
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8. HOW DO VERTICAL COMBINATIONS DIFFER FROM
HORIZONTAL AND CONGLOMERATE COMBINATIONS?
Horizontal combination – merger between two or more companies
producing the same good
Conglomerate combinations – corporation made of several companies that
are involved in different markets.
Vertical combination - a merger between two or more companies that are
involved with many different production phases of the same good.
Vertical combinations are a merger between companies that are involved
with different production phases, whereas horizontal and conglomerate
productions are involved with only one production phase.
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9. WHY MIGHT A BUSINESS OWNER WANT TO
OPEN A FRANCHISE?
Franchise: an enterprise that uses the original company’s name to sell
goods and/or services.
When business owners have franchises, the name of the business is
spread around, the franchisor provides access to tools and provides
advertising for the parent business.
Franchise agreements include upholding the reputation of the business.
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10. WHAT IS THE CUSTOMERS ROLE IN A
COOPERATIVE?
Cooperative: a business that is owned by those who use its goods and
services.
They are members of the cooperative.
A customer can join the cooperative and invest money to get the benefits of
being part of that cooperative.
While in the cooperative, members share the costs of maintenance and
other things the co-op might need to spend money on.
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11. HOW DOES A NONPROFIT ORGANIZATION DIFFER FROM
OTHER TYPES OF BUSINESS ORGANIZATIONS?
It raises money, not for its own members, but for other things that benefit
other people. Ex: raising awareness of certain causes, improving
education, providing healthcare, etc.
The income raised by non profit organizations isn’t taxed by the
government.
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12. CREDITS
Pennington, Robert Leroy. Holt Economics. Austin, Texas: Holt, Rinehart
and Winston, 2003. Print.
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