Do Now With your group… make a list of 10 steps you think are involved in starting a business. What do you think it takes? Resources? Employees? Possible issues?

Partnerships, Corporations, Sole Proprietorship Business Structures Partnerships, Corporations, Sole Proprietorship

Objectives and Standards Explain the characteristics and analyze the advantages & disadvantages of sole proprietorships, partnerships, and corporations. Compare & contrast different types of business structures. E.23 Compare and contrast the following forms of business organization: sole proprietorship, partnership, and corporation.

Intro Who has a job? Who wants to start their own business one day?

Business Structure Research Go to Miss Tyler’s Weebly site List the 10 steps to starting a business and a brief summary for each step. You will have about 7 minutes to do this

Business Structure Research Click on Step 5 – Choose a business structure Read about the Types of Business Structures and fill out the chart on the back of your page as you read. You have 15 minutes Be prepared to answer questions

Sole Proprietorship Have you ever babysat? Done yardwork? Cleaned someone’s house? Business that’s owned an managed by a single individual Earns all of the firm’s profits and is responsible for all the firm’s debts Full liability Personal tax According to the IRS – about 75% of all American businesses are SPs (~6% of sales) Mostly small businesses

Sole Proprietorships Advantages Disadvantages

Sole Proprietorships Advantages Disadvantages Ease of start up Relatively few gov’t regulations Industry-specific (health codes, zoning laws ) All the profits Full control Easy to end Unlimited personal liability Limited access to resources Cant raise money (no stocks) Pay for physical capital yourself Lack of workers (turn down work) Lack of permanence Cease to exist Trouble finding/keeping good employees (can’t offer them benefits)

Sole Proprietorships What are some examples of sole proprietorships in Jackson? Why do you think some people choose to start a sole proprietorship as opposed to the other business types? What could be their motivation?

Partnerships Business owned by 2+ people who agree on a specific division of responsibilities and profits. In the US, ~7% of all businesses ~5% of all sales; ~10% of all income Self-employment tax; personal tax Limited Partnership Only 1 partner has unlimited personal liability for the firm’s actions Investors

Partnership Advantages Disadvantages

Partnership Advantages Disadvantages Easy to start Shared decision-making and specialization Larger pool of capital Unlimited liability (unless structured as a limited partnership). Potential for Conflict

Limited Liability Company (LLC) Owners not personally liable Self-employment tax, personal or corporate tax Partnership (LLP) or corporation

LLCs Advantages Disadvantages

Corporation Legal entity owned by individual stockholders (limited liability of firm’s debts) Stock – a certificate of ownership in a corporation You own stock = you are part owner of that corporation ~20% of all businesses in U.S. Finance.yahoo.com

Corporation Advantages Disadvantages

Corporation Advantages Disadvantages Transferable ownership Ability to attract capital Long lives Difficult/expensive to start Double taxation Stockholder (dividends = income) Corporate tax Loss of control Board of directors/managers Original owners lose control More regulation Careful records of transactions – protect shareholders SEC – regulates stock market FTC – prevent monopolies

Types of Corporations Closely Held Corporations – only sell stock to a few people. Publicly held corporations – sell stock to many people; open market

Corporate Combinations Horizontal Merger – join two or more forms competing in the same market with the same good or service What if McDonald’s created a horizontal merger? Who would they buy?

Vertical Mergers Two or more firms involved in different stages of producing the same good or service. T-shirt example Disney and Pixar

Conglomerates Three or more businesses that make unrelated products. Berkshire Hathaway

Multinational Corporations Corporations that operate in more than one country at a time

MNCs Advantages Disadvantages

Cooperatives Business that’s owned and operated for the benefit of those using its services Elected board of directors/officers – day-to-day business Members – voting power to control direction of the cooperative.

Cooperatives Advantages Disadvantages

Nonprofit Organizations Functions like a business but does not operate for the sole purpose of making a profit Red Cross, YMCA, adoption agencies, humane society, etc. Professional Organizations – nonprofit; work to improve image, working conditions, skill levels of people in certain occupations NEA, ADA, AMA, etc.

Nonprofits Advantages Disadvantages

Corporations Commercial Project Test Grade Due April 18th

Discussion Questions Why do you think some people choose to start a sole proprietorship instead of a partnership? In your opinion, what would be the most difficult types of business structure to start? Why? Which of these would be the most difficult to maintain? Easiest?

Assessment (Quiz Grade) Imagine that you write a Ask [Name] column. Write an answer to Exhausted Entrepreneur addressing their questions and explaining what business you recommend and why. Be sure to include some pros and cons of each type of business.

Advice Column Dear (Your name), I want to start a business, but I’m not sure what kind I want to start. My parents think I should start a sole proprietorship, but my friends keep telling me that I should start a partnership. My teacher said that I’m too young to start a corporation, but I don’t even know what that is! Help! Can you explain the difference between these types of businesses and tell me which I should start and why? Sincerely, Exhausted Entrepreneur