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What we are studying next…. Send your guess in!. Basic Ownership Forms. Mr. Hudnall. Business Organizations. 3 main types Sole Proprietorship Partnership Corporation Considerations for choosing the best type Owner’s liability for firm’s debts The ease and cost of forming the business - PowerPoint PPT Presentation
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What we are studying next…
Send your guess in!
Basic Ownership FormsMr. Hudnall
Business Organizations3 main types
Sole ProprietorshipPartnershipCorporation
Considerations for choosing the best typeOwner’s liability for firm’s debtsThe ease and cost of forming the businessThe ability to raise fundsThe taxesThe degree of operating control the operator can
retainThe ability to attract employees
Sole Proprietorship
Advantages DisadvantagesEasy &
inexpensive to formProfits go to ownerDirect controlFewer regulations No special taxesEase of dissolution
Unlimited liabilityDifficult to get capitalLimited management
experienceTrouble getting
employeesTime commitmentUnstable business lifeLosses owner’s
responsibility
Created, Owned, Operated, and usually financed by one person.
Famous Sole Proprietorships?
PartnershipsTypes of partnerships
General Partnerships Partners share responsibilities, profits, etc Unlimited liability
Limited Partnerships General partners have unlimited liability and are
responsible for its operations. Limited partners have limited liability and do not
participate in the company’s operations.
PartnershipsAdvantages DisadvantagesEase of formationAvailability of capitalDiversity of skills &
expertiseFlexibility to respond to
changing business conditions, Relative freedom from government control
No special taxes
Unlimited liability for general partners
Potential for conflict between partners
Limited lifeSharing of profitsDifficulty in leaving a
partnership
Famous Partnerships?
CorporationsLegal entities with a separate existence from its owners.
Types of CorporationsC – corporations
conventionalS – corporations
Taxed like a partnership
CorporationsAdvantages Disadvantages• Limited liability• Easy to get
financing• Easy to transfer
ownership• Unlimited life-span• Tax deductions
Double taxation of profits
Costly & complex to form
Government restrictions
What are some famous corporations?
?
LLCAdvantages DisadvantagesProtection of
personal assetsAvoid double-
taxation of profitsFlexible
management & organization
Good for foreign investors
• Often required to have a limited life (< 30 years)
• Not corporations, so can not issue stock
Largest LLCs?
$98 billion in 2007 $88.3 billion
$74.8 billion – self supporting federal agency
$49 billion
$25 billion $13.6 billion
CooperativesFormed by people with similar interestsGoals: to reduce costs and gain economic
powerProfits go to member-owners in proportion to
contributionsHave corporate features (limited liability,
unlimited life, Board of Dir.)Types of Cooperatives
Seller CooperativesBuyer Cooperatives
FranchisesIndividually owned companies that
operate like they are part of chain of companies
Franchisor supplies management training, operating assistance, brand name, product, financial assistance, etc
Franchisee pays a fee for the franchise and sells the goods or services of the franchisor
Allows an individual to own a business without starting from nothing – buys a proven product and operating methods
FranchisesAdvantages DisadvantagesIncreased opportunity
to expand (franchisor) Recognized name,
product, and operating concept (franchisee)
Management training and assistance (franchisee)
Financial assistance (franchisee)
Loss of control (franchisor)
Costs of franchisingRestricted operating
freedom (franchisee)
Most Popular Franchises?