Upload
roger-wilkerson
View
222
Download
0
Tags:
Embed Size (px)
Citation preview
Objective 2.01
Understand the types of business ownership.
1
Types of Business Ownership Sole Proprietorship Partnership Corporation Specialized partnership Specialized corporations Cooperative Franchise
2
Sole Proprietorship Business owned by one person. Formation may vary by states
3
Sole Proprietorship Advantages
For owner Easy to form Complete control of business Recipient of 100% of the profit Low taxes
4
Sole Proprietorship Disadvantages
Limited capital Pay for everything yourself Lack of business skills Limited to the lifetime of owner
5
Sole Proprietorship Disadvantages
Liabilities Anything that a company owes
Unlimited liability Types of liabilities
Financial Employment
Firing of an employing that missed too many days Accidents and injuries on premises
Customer breaks a leg while on business property Company vehicle-related
Driver runs into a building while driving company’s car Product-related
Toys easily injure toddlers Errors and omissions
Employee accidentally damages a customer’s property
Sole Proprietorship Termination
How is a sole proprietorship terminated?
By decision By death of owner
What are some sources that may be used for investment? Personal, gifts, and loans
7
Partnerships Business owned by two or more
persons who share the risks and rewards
Formation varies by each state
8
Partnership Agreement Contract that outlines the rights and
responsibilities of each partner How much each partner will invest How to share profits How to divide workload How to end partnership
Actions of the partners, bankruptcy, death and/or court order
Partnership Advantages Easy to start More capital and credit available Work load more evenly shared Losses are also shared Partners bring different skills to the
business Low taxes
10
Partnership Disadvantages
Profits are shared Decisions are made jointly Share unlimited legal and financial
liability Disagreement between partners
11
Types of Partners
Type of
Partner
Participation in the
Business
Relationship to the Public
Degree of
Liability
Dormant
Not active Unknown Unlimited
General Active Known Unlimited
Limited Not active Known Limited
Secret Active Unknown Unlimited
Silent Not active Known Unlimited12
Corporation Business owned by many people, but treated by
law as one person Stockholders
Owners of a corporation Get share of the profits (dividend) Get to vote on how the business is run
One share of common stock equals one vote Board of Directors
Control the corporation Hire officers who run day-to-day activities (Ex. CEO)
Charter License to run a corporation issued in state of HQ
13
Corporation Advantages
Capital easy to obtain (sell stock or bonds)
Limited liability for shareholders Indefinite lifetime
14
Corporation Disadvantages
Double taxation: profits and earnings Government regulations Operations controlled by shareholders
and board of directors instead of original owner(s)Ex: 10 years after founding Apple, Steve
Jobs was fired by the board of directors. Difficult to start; complicated to run
15
Corporation How is the life of a corporation
terminated? Determined by charter or indefinite
lifetime What is the source of investment
for corporations? Stocks and bonds
16
Specialized Corporations S-Corporation, also known as
Subchapter “S”, treats stockholders as individuals by taxing them once.
Limited Liability Company (LLC) Blends elements of corporation and
partnership Why do small businesses operate as LLCs?
To receive limited liability protection Nonprofit Corporation
Does not pass profits onto shareholders Who benefits from services of nonprofit
corporation? Benefits the public and is exempt from taxation
17
Types of Corporations Domestic – chartered in a specific
stateExamples located in North Carolina:
Bank of America Corporation Lowe’s Home Improvement Store
Foreign – chartered in one state, but doing business in another state
Alien – chartered in another nation, but doing business in a state
18
Types of Corporations Public
Established for a governmental purposesExamples
National Science Foundation Export-Import Bank of the United States
Private Established by individuals for business or
charitable purposes.Examples
IBM American Cancer Society
19
Types of Corporations Public
Stock available to general public through stock markets.
Private Stock owned internally by employees of
company.
Cooperatives
Formed by a group of individuals or businesses to serve their needs in order to gain bargaining power against bigger businesses
Owned and controlled equally by the people who use its services or by the people who work there
21
Franchise Contractual agreement to sell a company’s
products or services in a designated geographic area
Two main formats: Business-format
Requires franchisee to sell products or service in a specific format
Product trade-name Allows franchisee to sell specific products. This format is usually formed by automobile, appliance,
and petroleum product
22
Franchise Advantages
Easy to start Proven methods and product(s) of
parent company Rely on the name of the parent
company Disadvantages
Strict terms of how the business is run Limited as to what products and
services are offered