2. Sole proprietorships • Business owned and run by a single person who has the rights to all profits and unlimited liability for all debts of the firm.

3. Sole proprietorships Advantages Disadvantages The owner is personally liable and fully responsible for all losses and debts of the business. This is called ‘unlimited liability.’ The difficulty of raising capital. Size and efficiency and having enough inventory. The owner does not have ‘business sense.’ • Easy to start up • Simple management • Owner does not have to share profits with other owners. • Do not have to pay separate business income taxes. • Psychological satisfaction of being one’s own boss. • Easy to get out of the business

4. Sole proprietorships disadvantages The difficulty of attracting qualified employees. Limited life. The business ceases to exists if the owner dies, quits, or sells the business.

5. Partnerships • A partnerships is a business that is jointly owned by two or more persons. • TYPES OF PARTNERSHIPS • General partnership-all partners are responsible for the management and financial obligations of the business. • Limited partnerships-at least one partner is not active in the daily running of the business.

6. partnerships Advantages Disadvantages Each partner is fully responsible for the acts of all the other partners. Has a limited life. If a partner dies or leaves, the partnership must be dissolved and reorganized. Potential for conflict between partners. • The ease of starting a business. • The ease of management. • The lack of special taxes on a partnership. • Can attract financial capital more easily than proprietorship. • More efficient than proprietorships. • Easier to attract top talent.

7. Corporations • A form of business organization recognized by law as a separate legal entity with all the rights of an individual. This status gives the corporation the right to buy and sell property, to enter into legal contracts, and to sue and be sued.

8. Forming a corporation • People who want to form a corporation must file for permission from the federal government or the state where the business has its headquarters. • If approved, a charter- a government document that gives permission to create a corporation is granted. • The corporation sells ownership in the firm, called shares of stock. Investors are called shareholders.

9. Corporate Structure • Common Stock represents basic ownership in a corporation. The owner of a common stock receives one vote for each share of stock. • Ie; If a corporation has 200 shares of stock and you own 1 share. You own 1/200th of the corporation. • Preferred Stock-represents non-voting ownership shares of the corporation. Preferred stockholders do not have the right to elect members to the board of directors. If a corporation goes out of business the preferred stockholders get their investment back before common stockholders.

11. Competition • The struggle among sellers to attract consumers. • Two types of competition: • Perfect and Imperfect competition

12. PERFECT COMPETITION Ideal market situation characterized by a large number of well informed buyers and sellers who exchange identical products. Five conditions must exist for perfect competition to happen: • There must be a large number of buyers and sellers. • Because they deal in identical products, there is no need for brand names and no need to advertise. • Sellers compete against each other to obtain the consumer’s dollar. • Both buyers and sellers are well informed about prices. • Buyers and sellers are free to enter into, or conduct, or get out of business.

13. Imperfect competition • The name given to market structures that lacks one or more of the conditions required for perfect competition. • Monopolistic competition, oligopoly, and monopoly are the three forms of imperfect competition.

14. Monopolistic competition • Products are similar and include things such as designer clothing, cosmetics, and shoes. The monopolistic aspect occurs when sellers are able to raise the price within a narrow range. • The competitive aspect occurs when if they raise or lower the price enough consumers will ignore minor differences and change brands.

15. Oligopoly • Describes a market in which a few sellers dominate the industry. For example, Burger King, McDonald’s and Wendy’s dominate the fast-food industry. Other industries include, automobiles, airlines, etc.

16. Monopoly • A market with only one seller for a particular product. • Examples of monopolies: cable television, the gas company, Commonwealth Edison, and other utilities.

17. Corporation Advantages Must keep detailed expense and sales records. Are taxed twice. Profits are taxed and dividends are taxed as personal income. The owners have little voice in how the business is run. Are subject to more government regulation. • The ease of raising financial capital. • Limited liability. The corporation, not its owners is fully responsible for its obligations. • Can hire professional managers to run the firm. • Continues to exist even when ownership changes. • Ease of transferring ownership.