Types of Businesses

The four main forms of business ownership are listed below: sole proprietorship corporation partnership co-operatives ✉ A franchise is a combination, or hybrid, of the four forms of ownership.

Sole Proprietorships ■ is a business owned by one person (the proprietor) Advantages: 1. Be your own boss 2. Legally easy to start and end 3. Owner keeps all profits Disadvantages: 1. Unlimited liability 2. Difficulty financing 3. Owner may lack certain skills or abilities

Unlimited liability ■ If the business does poorly, the owner is responsible for its losses. ■ Owner responsible for all debt Examples of Sole Proprietorship: ■ A1 Video ■Education Portal - Definition and A&DEducation Portal - Definition and A&D

Partnerships ■ Two or more owners ■ Written partnership agreement Two types of partnerships: 1. General partnership – share all debts 2. Limited partnership - partners are only responsible for the funds they both invested in the initial business. This is called limited liability.

Advantages: 1. Access to more capital 2. Shared responsibility 3. Access to other skills and abilities Disadvantages: 1. Unlimited liability in general partnerships 2. Partnership disagreements Video: Education Portal - Creating Partnership Agreement Education Portal - Creating Partnership Agreement Partnerships

Corporation ■a business granted legal status with rights, privileges, and liabilities that are distinct from those of the people who work for the business ■can be small such as a one-person business or large such as a multinational that conducts business in several different countries ■Small portions of corporate ownership that are owned publicly are called stocks or shares ■Many shareholders with limited liability ■board of directors runs a corporation that is owned by shareholders

■ One vote per share Advantages: 1. Limited liability 2. Transfer of ownership simple Disadvantages: 1. Time consuming and costly to set up 2. Majority shareholders control the company Corporation

Types of Corporations Private corporations (Mars, Uncle Ben’s, Pedigree) Crown corporations (CBC, VIA Rail) Public corporations (RIM, Sears, Nortel) Municipal corporations (Town of Milton)

Co-operatives ■owned by the workers or members who buy the products or use the services that the business offers ■business is motivated by service and not profit ■One vote per member, does not matter how many shares you own ■Example: Mountain Equipment Co-op, The Co-operators Group

Advantages: 1. Group participation saves money (less expensive goods/services) 2. Easily started 3. Focus in helping members; not-for-profit 4.no income tax - no dividend Disadvantages: 1. Decision making process time consuming and difficult 2.nominal membership fee - MEC $5before you can make a purchase Co-operatives

Franchise ■franchiser licenses the rights to its name, operating procedure, designs(owns the concept) ■business expertise to another business called the franchisee (leases the concept) ■franchise agreement can provide the franchisee with a ready made, fully operational business brand recognition that is appealing to consumers

Requirements before a franchise is awarded may include: paying the franchise fee agreeing to pay a monthly percentage fee as well as any national or local advertising costs purchasing all supplies centrally from the franchiser participating in franchiser standards training Example: Boston Pizza International Inc., McDonalds Franchise

Advantages: 1. Proven success; less risk 2. Formula for set-up and operations 3. Brand recognition Disadvantages: 1. Costly start-up 2. Fees to franchisee 3. Not much autonomy (requirements to buy from franchiser) Franchise

International Business Structures ■ number of different business structures allow businesses to expand into international markets Joint Ventures: ■ when two companies come together to create a 3rd, separate entity ■ can match the skills and expertise of two different individuals or businesses to generate more benefits for both parties (Hulu – NBC and ABC and News Corp; XFL – NBC and World Wrestling Entertainment)

Strategic Alliances: ■ occur when two or more businesses agree to commit particular resources to achieve a common set of objectives. ■ Alliance partners remain separate and entirely independent of each other (680 News and CNN – News Coverage) International Business Structures

International Franchises: ■way to achieve an international presence by buying the rights to a chain operation from the franchiser (McDonalds, KFC) Mergers: ■when two or more companies join together ■one of the businesses usually wants to purchase a controlling interest in the other company, or both business have combined interests (Burger King’s owners are purchasing Tim Hortons) International Business Structures

Offshoring: ■relocates some of a company’s operations to another country ■Usually happens to take advantage of lower labour costs, to be closer to large and emerging buyer markets, and to have access to skilled workforces (Motorola – 16 separate R&D centers in China, with 10% of all their R&D employees) International Business Structures

Multinational Corporations: ■ business enterprise that conducts business in another country or several different countries ■ offers different benefits to the country it invests in. Some positive benefits include new jobs and training for people. ■ Negative consequences could be less pay and more financial instability for citizens of that country International Business Structures