Warmup Do you know anyone who owns their own business? Describe what they do.

Part I – Types of Business Business and Labor Part I – Types of Business

Sole Proprietorship: single owner – most common form of business in US Advantages Owner makes all decisions Keep all the profits No corporate income tax Easiest to set up Disadvantages Not an expert in all areas Responsible for all mistakes Unlimited Liability responsible for all debts, personal property can be taken Hard to raise capital (money)

Partnership: Two or more owners Advantages Can raise more capital Share in responsibility No corporate income tax Disadvantages Unlimited Liability responsible for all debts, personal property can be taken Share decision making Share profits More complicated to set up than sole proprietorship

Corporation Company is owned by people who buy its’ stock Advantages Can raise a lot more capital ($) through sale of stocks and bonds Decisions are made by professionals Limited Liability only responsible for how much you have invested Earns the most money in US Disadvantages Have little say in how the company is run Only share in portion of profit Most complicated to set up Corporate Income Tax

Business Types and Profits Sole Proprietorships = 72% Corporations = 20% Partnerships = 8% Earnings Corporations = 83% Partnerships = 12% Sole Proprietorships = 5%

How are corporations established? Charter: government permission to organize a corporation Stock: shares in the company sold to the public

Who owns a corporation? Stockholders

How are corporations run? Owners = Stockholders who elect the Board of Directors who select the President who hires VP of Sales VP of Production VP of Finance

What other types of business organizations are there?

Non-Profit Organizations Businesses that are not out for profit Cooperatives Nonprofit organization of people set up to carry out an economic activity Examples

Franchise Individuals buy right to use a corporations name and product