Microeconomics: Corporation and Sole Proprietorship Essay

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Sole Proprietorship Business owned & ran by one person. Most common form of business. 

Partnership Business owned by 2 or more people. 

Corporation A business owned by stockholders, but having all rights of an individual. 

Sole Proprietorship advantages easy to start, enjoys all profit, business is tax exempt, satisfaction, ease of getting out 

Sole Proprietorship disadvantages unlimited liability, difficulty raising capital, limited managerial experience, attracting qualified employees, limited life 

Partnership advantages easy to start, each partner brings skills, business tax exempt, attract capital easier, more efficient 

Partnership disadvantages getting along with other partner, limited life 

Corporation advantages easy to raise capital, hire professional managers, limited liability, unlimited life. 

Corporation disadvantages expensive charter, owners have little say in how business is ran, double taxation, more gov't regulation. 

inventory How much of a product you have in stock (in store) 

unlimited liability owner is fully responsible for all debts & losses of the business. 

limited life business dies when the owner dies or quits. 

bankruptcy court granted permission to cease or delay debt payments that hurts personal credit rating. 

charter government permission to establish a corporation 

stock ownership certificates in a corporation 

bond a written promise to repay later 

principal amount originally borrowed 

interest price paid for use of another's money 

horizontal merger Two businesses merge that are exactly the same. 

vertical merger When businesses merge that are different steps in the production process 

conglomerate Firm with 4 businesses making unrelated products with none responsible for a majority of profit. 

multinational Corporation with operations in different countries 

multinational advantages Transfer new technology, create new jobs, & generate revenue for host
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