Sole Proprietorship vs Partnership

Sole Proprietorship

• Ownership: Single owner
• Profit: Personal profit
• Taxation: Taxed at personal income tax rate
• Decision-making: Owner makes all important decisions
• Profit Share: Keeps a higher share of profits compared to partnerships
• Taxation as Business: Does not pay income taxes as a company
• Owner's Declaration: Owner declares profits as personal income tax
• Combined Income: If part-time business with full-time job, taxable income includes both
• Liability: Higher risk of losing money to creditors and liabilities; unlimited liability, owner liable for business debts.
• Business Closure: Business ceases to exist upon owner's death or decision to close.
• Setup: Easier to set up, minimal paperwork, limited regulation
• Funding: Funding limited to owner's contributions or borrowing
• Knowledge: Potential for less knowledge in certain areas

Partnership

• Ownership: Two or more owners
• Agreement: Partners establish an agreement detailing roles, profits, losses, procedures
• Skills: Diverse skills, combination enhances business decision making
• Capital: Shared capital can lead to greater financial resources
• Profit Taxation: Profits are taxed as personal income
• Potential Conflict: Potential disagreements and conflict about business operations
• Liability: General partners share liability (unlimited liability)
• Agency Power: General partner has agency power to sign contracts binding on the partnership
• Limited Partner: Limited partner takes no active roles in decision-making or running the business
• Setup: Easy setup
• Skills & Resources: More general skills, capital, knowledge. Profits are taxed once

Corporation

• Ownership Structure: Multiple owners with shared ownership
• Incorporation: Requires articles of incorporation outlining the corporation's rules
• Corporate Bylaws: Corporate bylaws are specific rules for corporation operations.
• Corporate Charter: By approval, state issue a corporate charter, outlining rules and regulations.
• Legal Separation: Owners and corporation are legally separate entities.
• Liability Protection: Owner's personal assets are protected from business liabilities.
• Continuity: Continues to exist even with ownership changes.
• Setup Complexity: Complex setup, more regulations and paperwork.
• Decision-making: Decisions are made slower.
• Taxation: Corporations face taxes on profits, and shareholders pay taxes on dividends.
• Management: Hires a CEO, shareholders are involved.
• Liability: Liabilities are on the corporation.
• Public Offerings: Can "go public" to allow stock ownership
• Funding: Can raise capital by selling stock
• Shareholder Power: Shareholders have power to fire people and run the corporation
• Costs: Legal fees, administrative costs, licensing costs

LLC (Limited Liability Company)

• Ownership Structure: Operates and pays taxes as a partnership but enjoys limited liability.
• Liability: Liability is limited to the company, not the owners
• Taxation: Profits are taxed only once
• Suitability: Not for big corporations,

Franchise

• Agreement: Contractual agreement to sell a company's products/services in a geographic area
• Organization: Can operate as a sole proprietorship, partnership, corporation, or LLC.
• Purchase: Purchase the franchise from a parent corporation.

Notary Public

• Function: Authorizes general transactions.

Production Function

• Key Elements: Factors of production, economic resources, production process, productivity.
• Factors of Production: Land (raw materials, processing), Labor, Capital, Information Technology, Entrepreneurship.
• Resources: Elements needed for production.
• Land Components: Raw materials and processing steps.
• Labor: Physical and mental work creating goods/services.
• Capital: Monetary investment in the business.
• Information: Keeping updated to impact production and marketing.

Accounting and Business Essentials

• Process: Recording, analyzing, and interpreting economic business activities.
• Expenses: Daily costs of operating a business
• Accounting Importance: Basic accounting knowledge is vital.
• Marketing: Activities in planning, pricing, promotion, distribution, and sales to satisfy customer demands. (Product, Place, Price, Promotion)
• Human Resources (HR): Activities relating to employees and their skills and salaries, social and physical well-being.
• Management: Planning organizing, leading the business, considering business ethics and responsibility.

Stages of Production

• Stages: Purchasing, processing, refining
• Quality Control: Standards for worldwide industries set by ISO
• Grading: Checking products to ensure size and quality meet standards (like AAA grade)

Production Systems

• Mass Production: Suitable for low variety, high volume products, quick, cheap.
• Batch Production: High variety, low volumes.
• Job Production: High variety, low volume, unique products.

Journal Question (Example)

• The most interesting business function is human resource management, pivotal to the smooth daily operations and positive customer experience, as proper management of employees and addressing individual needs (social and physical factors) is essential.

This quiz explores the differences between sole proprietorships and partnerships, detailing aspects like ownership, profit distribution, taxation, and liability. Learn how these business structures impact decision-making and closure processes while understanding their individual advantages and disadvantages.