Chapter 8

Forms of Business
Organizations
Lesson Objectives
• Define sole proprietorship
• Understand the characteristics of sole proprietorships
• Advantages and disadvantages of sole proprietorship
• Define partnerships
• Advantages and disadvantages of partnerships
 Bell Ringer
• Identify two or three examples
of businesses you might want
to start
• What might motivate someone
to start a business rather than
work for someone else?

This Photo by Unknown Author is licensed under CC BY

Video
• https://www.youtube.com/watch?v=BAQ6H6ZmoB0&ab_channel=G
abrielaGunawan
Sole
Proprietorship
Sole proprietorship
• The most common form of business organization.
• Sole proprietorship a business owned and run by a single person
• The sole proprietorship is the easiest form of business to start because
it involves almost no requirements except for business licenses and
fees.
Advantages of a sole Proprietorship

1) Easy to Open or close

2) Few Regulations Compared with other business organizations, sole
proprietorships are lightly regulated.
3) Freedom and control, Being your own Boss.
4) Owner Keeps Profits
Disadvantages
1) The main disadvantage of a proprietorship is that the
owner of the business has unlimited liability.
This means that the owner is personally and fully
responsible for all losses and debts of the business.
 Disadvantages
2) Difficulty of raising financial capital, (limited funds) Generally, a
large amount of money is needed to set up a business, and even more
may be required for its expansion.
3) Limited life. Business will end if owner dies
4) Limited managerial experience. The owner-manager of a small
company may be an inventor who is highly qualified as an engineer but
lacks the "business sense"
• Given the disadvantages, why do you think so many people choose
to start a sole proprietorship?
• What are some personal qualities that a sole proprietor might need
to form a successful proprietorship?
• Intelligence, determination, self-confidence, flexibility, a sense of
humor, commitment, and optimism.)
Practice
• Q1. What are the main advantages of a sole proprietorship?
• Q2. What are the main disadvantages of a sole proprietorship?
Q3.State True or False

• _______ 1. Sole proprietorship a business owned and run by a single person

• _______ 2. Unlimited liability is one of the main advantages of a sole proprietorship.

B. Multiple Choice
1. A business run by a single person is a
A. partnership.
B. corporation.
C. sole proprietorship.
D. limited liability corporation.
2. All of the following are advantages of a sole proprietorship except
a. ease of start up
b. freedom and control for the owner
c. limited regulation
d. unlimited liability
Game
• https://quizizz.com/admin/quiz/625c47c50a1476001ed4951d
Objectives:
∙ All students will be able to define partnerships
∙ Most students will be able to identified the types of partnerships
∙ Some students will be able to compare between the advantages and
disadvantages .
2) Partnerships
Partnerships

•A partnership is a business that is jointly owned by two or

more persons who agree on how responsibilities, profits, and
losses will be divided.
•The minimum number is 2 and the maximum number is 20
people
•To start a partnership, you need a partnership agreement
•Examples of partnership:
School,hospital,clothes shop,restaurant
 Bell Ringer

•What do you think are

some of the positive
and negative sides of
working with a
partner ?

This Photo by Unknown Author is licensed under CC BY-SA

Types of Partnerships
1.General partnership (GP)

2. limited partnership (LP)

3. limited liability partnership (LLP)

Types of Partnerships
1.General partnership is the most common form of partnership.

In it, all partners are responsible for the management and financial
obligations of the business. Partners share responsibility, liability, and
profits equally.
2. limited partnership ( asilents partner)

At least one partner is not active in the daily running of the business
and has limited responsibility for the debts and obligations of the
business.
3. limited liability partnership (LLP)
All partners are limited partners and not responsible for the debts
and other liabilities of other partners.

For example: If one partner makes a mistake that ends up costing the
business a lot of money, the other partners cannot be held liable. In
LLPs, partners’ personal savings are not at risk unless the debts arise
from their own mistakes
 Partnership
Partners can share ideas/There may be personality conflicts / Unlimited liabilities/ more funds /Shared profits/
easy to obtain money/Diversity in skills/ Business risk is shared / Specialization

Advantages Disadvantages
Partners can share ideas There may be personality conflicts
easy to obtain money/ Unlimited liabilities/ Shared profits
Diversity in skills
Business risk is shared
Specialization
more funds
 Advantages of Partnerships

Easy to Decision
Specialization
start Making

More funds Diversity in

more money skills
 Disadvantages of Partnerships

Limited life If one partner

makes a mistake,
all partners are
responsible in
general
Conflict may
partnership
Sharing profit happen between
partners.
Activity
Q1. Identify the type of partnership represented in each description?

• 1. Adam and Will open a toy store and they agreed to share the profits
and loses equally.

• 2. The only role that George plays in the partnership is to collect

profits or bear losses based on the amount of funds he contributed.

• 3. Stephen and Mike start a consulting service to help businesses

manage their trademarks and copyrights. They are the only partners,
sharing equally in the work, profits, and losses.