Type of

Business
Organization
 Business
✓A business is defined as an
organization or enterprising
entity engaged in commercial,
industrial, or professional
activities.

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 Sole Proprietorship
A sole proprietorship, also known as a sole
tradership, individual entrepreneurship or
proprietorship, is a type of enterprise owned
and run by one person and in which there is
no legal distinction between the owner and
the business entity.

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Advantages
• you're the boss.
• you keep all the profits.
• start-up costs are low.
• you have maximum privacy.
• establishing and operating your business is simple.
• it's easy to change your legal structure later if
circumstances change you can easily wind up your
business.

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Disadvantages
• you have unlimited liability for debts as there’s no
legal distinction between private and business
assets
• your capacity to raise capital is limited
• all the responsibility for making day-to-day business
decisions is yours
• retaining high-calibre employees can be difficult
• it can be hard to take holidays
• you’re taxed as a single person the life of the
business is limited.
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Partnership
✓ Partnerships are the simplest
structure for two or more people
to own a business together.

*Liability
✓ A liability is something a person or company
owes, usually a sum of money. In simple terms,
liabilities are legal responsibilities or
obligations.

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Advantages
• two heads (or more) are better than one
• your business is easy to establish and start-up
costs are low
• more capital is available for the business
• you’ll have greater borrowing capacity
• high-calibre employees can be made partners
• there is opportunity for income splitting, an
advantage of particular importance due to
resultant tax savings
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Disadvantages
• the liability of the partners for the debts of the business is
unlimited
• each partner is ‘jointly and severally’ liable for the
partnership’s debts; that is, each partner is liable for their
share of the partnership debts as well as being liable for all
the debts
• there is a risk of disagreements and friction among partners
and management
• each partner is an agent of the partnership and is liable for
actions by other partners
• if partners join or leave, you will probably have to value all
the partnership assets and this can be costly. 10
Corporation
✓ A corporation is an organization—
usually a group of people or a
company—authorized by the state
to act as a single entity and
recognized as such in law for
certain purposes.

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Corporation
✓ Owned by many people
(stockholders)
✓ Treated by law as one person
✓ Can own property
✓ Pay taxes
✓ Make contracts
✓ Sue and be sued

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Multinational Corporation
✓ A multinational corporation (MNC) is a company
that has business operations in at least one
country other than its home country.

Conglomerate
✓ A conglomerate is a company that owns a
controlling stake in smaller companies—
independent operators in similar, but sometimes
unrelated, industries.

Parent Corporation
✓ A parent company is one which has a controlling or majority
interest in another company, which gives it the right to
control the subsidiary's operations.
A subsidiary is an independent company that is more
than 50% owned by another firm. The owner is usually
referred to as the parent company or holding company. 13
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