Financial Management: Principles and Applications, 13/e

1.2 Three Types of Business Organizations

Although numerous and diverse, the legal forms of business organization fall into three categories: the sole proprietorship, the partnership, and the corporation. Figure 1.1 provides a quick reference guide for these organizational forms.

Figure 1.1

Characteristics of Different Forms of Business

Figure 1.1 Full Alternative Text

Sole Proprietorship

The sole proprietorship is a business owned by a single individual who is entitled to all of the firm’s profits and who is also responsible for all of the firm’s debt—that is, what the firm owes. In effect, there is no separation between the business and ...