Types of Business Chapter 22.1, 22.3

Vocab – Unit 2 – part 1 Reveal Corporation Transparency Charter (2nd definition) Discrimination Social Responsibility Stock Sole proprietorship Stockholder Partnership Financial Capital Articles of Partnership Unlimited Liability (p.601) Board of Directors Cooperative

Business Types There are three main types of businesses. They differ in size and in daily operations. Sole-Proprietorship Partnership Corporation

3 Types of Businesses Sole Proprietorship Owned by 1 person Easy & relatively inexpensive to start Typically small businesses Most common form of business ~73% of all businesses

Sole Proprietorship Advantages Receive all profits Quick decisions – don’t have to consult with other owners Relatively low taxes Disadvantages Unlimited liability Handle all decisions Time consuming Rely on own funds Business depends on one person

3 Types of Businesses cont. 2. Partnership Owned by 2 or more individuals Articles of Partnership – Partners sign an agreement on what each is responsible for.

Partnership Advantages Losses are shared More efficient than proprietorships Pay taxes on share of profit Easier to borrow money Disadvantages Profits are shared Unlimited liability, most of the time Must reach agreements Committed partners

Started by a founder who gets a charter – 3. Corporation - Business has some of the same rights and responsibilities as individuals Can - own property, sue or be sued, pay taxes Started by a founder who gets a charter – issued by the state gov’t granting permission to start the business Describes the business and amount of stock that will be issued Owned by Stockholders Run by an elected Board of Directors Complicated structure Are Double Taxed – 1. Corp. pays a tax on its profits. 2. After profits are distributed to the stockholders – stockholders pay a tax on those earnings.

Advantages Raise financial capital by selling new shares of stock Owners do not have to devote time to make money. Stockholders have limited liability; they only lose what they put in. Individuals trained in specific areas make decisions – CEOs/CFOs Disadvantages Decisions are slow. Interest of the board may differ from the stockholders. Double taxation. Govt. taxes corporate profit then individual shares. Stockholders have little or no say in how business is run. Expensive start up Subject to more gov’t regulations

Other Types of Businesses Franchise – sell the name & structure of a business Help train employees & set up the business Franchisee – pays a start up fee & annual fee Non – Profit – Making a profit is not the main purpose of the business Cooperative – individual businesses that work together to benefit all members Producer – Ex: Farmer’s Market Consumer – Ex: PCC Natural Markets, REI Service – Ex: Credit Unions, Utility companies

In 1-2 sentences write the main characteristics of the following - Sole Proprietorship Corporation Partnership Charter Articles of Partnership Board of Directors Stock Transparency Unlimited liabilty Cooperative

Roles of Business 1. Responsibilities to Consumers 2. Responsibilities to Owners 3. Responsibilities to Employees 4. Responsibilities to the Community

Responsibilities to Consumers Sell products that are safe Products should work as promised Be truthful in advertising Treat all customers fairly

Responsibilities to Owners To protect stockholders – to do this they - Reveal – making public/making known important financial information Transparency – Not hiding. Making business activities visible for everyone

Responsibilities to Employees Provide a safe workplace Treat all workers fairly and without discrimination * Basis of race, religion, color, gender, age, or disability

Responsibilities to the Community Social responsibility – obligation to pursue goals that benefit society as well as themselves. ex – charitable gifts, national volunteering, assisting disaster victims through relief agencies.

What did you do? Did the business try to fix the problem? Think about a personal experience in which a product you purchased was flawed? What did you do? Did the business try to fix the problem?

Exit Ticket Think about the different business responsibilities we talked about today – Responsibilities to consumers, owners, employees and community. Which of these makes the biggest impact on your community? Why? This should be at least one paragraph – 5 sentences.