Functional areas:

• HR
• Sales
• Marketing
• Distribution
• Legal
• Customer Service

How businesses are organized:

Sole proprietorship
• One person owns/operates business
• Advantages
• Easy to set up
• Independence, control over business
• Disadvantages
• Unlimited liability, debts/lawsuits targeted on single person
• Lack of continuity
• Limited capitol, very hard to borrow money from banks due to
concentrated risk
• Personal collateral for a loan
General partnership
• Two or more partners
• Advantages
• Easier to get loans than sole proprietorship, more people to assume
responsibility
• Disadvantages
• Unlimited liability
• Lack of continuity
• Limited capitol
• Personal collateral for a loan
Limited liability partnership
• Hybrid form of partnership
• Designed for professionals who do business as a partnership (doctors,
accountants)
• Advantages
• Partner liability is limited to the extent of:
 Their own wrongful act
 The supervision of someone's wrongful act
• Taxation, individuals are taxed (no double taxation)
• Disadvantages
• Varies state to state
Limited liability corporation
• Hybrid, limited liability of a corporation and tax advantages of a partnership
• Advantages
• Liability is limited to amount of investment
• Choice to be taxed as partnership or corporation
• Disadvantages
• State laws are not uniform
• Relatively new form of organization, not many precedent cases (increase
risk)
S-Corporation
• Corporation rules in organization and operation, taxed as partnership
• Advantages
 Limited liability
 Taxation as partnership, no double taxation
• Disadvantages
 Small, limited capital
 Limited number of owners
 Less flexible to form and operate, more hoops to jump through
Publicly held corporation
• Business is owned by shareholders
• Advantages
 Limited liability
 Ease of continuity
• Disadvantages
 Double taxation, company gets taxed on income and then pay
dividends which get taxed to shareholders
 High startup cost, legal work and registration process
 Complex regulations and legal requirements
 Can be taken over against will of managers
 Owners don't have control