8.2 Sole Proprietorships
and Partnerships
Objectives
 Describe the advantages and
disadvantages of sole proprietorships.
 Describe the advantages and
disadvantages of partnerships.
CONTEMPORARY ECONOMICS
© Thomson South-Western
8.2 Sole Proprietorships
and Partnerships
Key Terms
 sole proprietorship
 liability
 partnership
 general partnership
 limited partnership
CONTEMPORARY ECONOMICS
© Thomson South-Western
8.2 Sole Proprietorships and Partnerships
SLIDE
3
Sole Proprietorship
Sole proprietorship is the simplest form
of business organization; a firm that is
owned and managed by one person, but
sometimes hires workers.
CONTEMPORARY ECONOMICS
© Thomson South-Western
8.2 Sole Proprietorships and Partnerships
SLIDE
4
Who Is a Sole Proprietor?
About three quarters of all businesses in
the United States are owned by sole
proprietors.
Nearly all sole proprietorships are small.
CONTEMPORARY ECONOMICS
© Thomson South-Western
8.2 Sole Proprietorships and Partnerships
SLIDE
Distribution of Sole Proprietorships
Based on Annual Sales and by Industry
5
Figure 8.2
CONTEMPORARY ECONOMICS
© Thomson South-Western
8.2 Sole Proprietorships and Partnerships
Advantages of
Sole Proprietorships
SLIDE
6
Easy to start
Few government regulations
Complete control
Owner keeps all profit
Lower taxes
Pride of ownership
CONTEMPORARY ECONOMICS
© Thomson South-Western
8.2 Sole Proprietorships and Partnerships
SLIDE
7
Disadvantages of
Sole Proprietorships
Unlimited personal liability
Difficulty raising financial capital
Limited life
Difficulty finding and keeping good
workers
Broad responsibility
CONTEMPORARY ECONOMICS
© Thomson South-Western
8.2 Sole Proprietorships and Partnerships
SLIDE
8
Partnerships
A partnership involves two or more
individuals who agree to contribute
resources to the business in return for a
share of the profit.
CONTEMPORARY ECONOMICS
© Thomson South-Western
8.2 Sole Proprietorships and Partnerships
SLIDE
9
Types of Partnerships
General partnership—partners share
both in the responsibility for running the
business and in any liability from its
operation
Limited partnership—at least one partner
is required to be a general partner
CONTEMPORARY ECONOMICS
© Thomson South-Western
8.2 Sole Proprietorships and Partnerships
SLIDE
Distribution of Partnerships
Based on Annual Sales and Industry
10
Figure 8.3
CONTEMPORARY ECONOMICS
© Thomson South-Western
8.2 Sole Proprietorships and Partnerships
SLIDE
11
Advantages of Partnerships
Easy to start
Few government regulations
Shared decision making and increased
specialization
Greater ability to raise financial capital
More able to attract and retain workers
Lower taxes
CONTEMPORARY ECONOMICS
© Thomson South-Western
8.2 Sole Proprietorships and Partnerships
SLIDE
12
Disadvantages of Partnerships
Unlimited personal liability
Limited life of the business
Partners may disagree
Profits must be shared
CONTEMPORARY ECONOMICS
© Thomson South-Western