Essential Standard 2.00 Understand the nature of business. 1

Objective 2.01 Understand the types of business ownership. 2

Types of Business Ownership Sole Proprietorship Partnership Corporation Cooperative Franchise Which type of ownership is the most common in the United States? Which types of ownership counts for the most revenue in the United States? 3

Sole Proprietorship How many people own a sole proprietorship? Who manages a sole proprietorship? How are sole proprietorships formed? 4

Sole Proprietorship Advantages & Disadvantages Advantages for Owner Easy to form Complete control of business Recipient of 100% of the profit One time taxation Disadvantages for Owner Limited capital Unlimited liability Limited lifetime 5

Sole Proprietorship continued How is a sole proprietorship terminated? What are some sources of funding that may be used for investment? What are some local examples? 6

Partnership How many people are considered for a partnership ownership? Who manages a partnership? How is a partnership formed? 7

Partnership Advantages & Disadvantages Advantages for Partners Easy to form More capital and credit available Work load more evenly shared Losses are also shared Disadvantages for Partners Unlimited liability Limited lifetime – if partner leaves or dies Profits are shared Decisions are made jointly Hard to add other partners 8

Partnership continued How is a partnership terminated? What are some sources of funding that can be used for investments by partners? What are some examples of partnerships? Can you name some local examples? 9

Specialized Partnerships Why would an investor choose a limited liability partnership? Why would businesses choose to enter into a joint venture? What is meant by the saying “by proof of existence”? 10

Types of Partners Type of Partner Participation in the Business Relationship to the Public Degree of Liability General*ActiveKnownUnlimited DormantNot activeUnknownUnlimited LimitedNot activeKnownLimited SecretActiveUnknownUnlimited SilentNot activeKnownUnlimited 11

Corporation Who owns a corporation? How is ownership determined? Who manages a corporation? How are corporations formed? 12

Corporation Advantages & Disadvantages Advantages of Corporations Capital easy to obtain Limited liability for shareholders Can invest without having to manage day-to-day operations Possibility of unlimited lifetime of business Decision-making is shared Disadvantages of Corporations Double taxation: profits and earnings Subject to more laws than other types of ownership More difficult to form Operations controlled by shareholders and board of directors instead of original owner(s) Example: 10 years after founding Apple, Steve Jobs was fired by the board of directors. 13

Corporation continued How is a corporation terminated? What is the source of investment for corporations? What are some examples? 14

Specialized Corporations What is special about an S-corporation? Why would a small business operate as an limited liability company (LLC)? Who benefits from services of a nonprofit corporation? 15

Cooperatives & Franchises Cooperatives or Co-op – Why would an individual or business choose to be part of a cooperative? – What are some examples of a cooperative? Franchise – Why would an individual choose franchise as a form of business? – What are some examples of a franchise? 16