Business Ownership and Operations Chapter 6 Take a note sheet on your way in. Make sure you are in your assigned seats or you will be marked absent.

Types of Business Ownership Sole Proprietorship Partnership Corporation

Sole Proprietorship A business owned by only one person Sole Proprietorship examples include small businesses, such as a single person art studio, a local grocery, or an IT consultation service. The moment you start offering goods and services to others, you form a Sole Proprietorship. It's that simple.

Sole Proprietorship - Advantages Easiest and least expensive form of ownership to organize Sole proprietors are in complete control and may make decisions as they see fit Sole proprietors receive all income generated by the business to keep or reinvest Profits from the business flow-through directly to the owner’s personal tax return (Schedule C) The business is easy to dissolve, if desired

Sole Proprietorship - Disadvantages Sole proprietors have unlimited liability and are legally responsible for all debts against the business Their business and personal assets are at risk May be at a disadvantage in raising funds and are often limited to using funds from personal savings or consumer loans The life of the business ends when the sole proprietor dies

Partnership A business owned by two or more persons who share the risks and the rewards Apple & MasterCard Airbnb & Flipboard BuzzFeed & Best Friends Animal Society Alexander Wang & H&M GoPro & Red Bull CoverGirl & Lucasfilm Pottery Barn & Sherwin-Williams UNICEF & Target Casper & West Elm Nike & Apple Bonne Belle & Dr. Pepper BMW & Louis Vuitton Uber & Spotify

Partnerships Continued https://www.businessinsider.com/10-successful-cofounders-and-why-their-partnerships-worked

Partnership - Advantages Relatively easy to establish Time should be invested in developing the partnership agreement With more than one owner, the ability to raise funds may be increased The profits from the business flow directly through to the partners’ personal tax returns The business usually will benefit from partners who have complimentary skills

Partnerships - Disadvantages Partners are jointly and individually liable for the actions of the other partners Profits must be shared with others Since decisions are shared, disagreements can occur The partnership may have a limited life, it may end upon the withdrawal or death of a partner

Corporation A business owned by many people but treated by law as one person The corporation can own property, pay taxes, make contracts, and be sued just like a person The owners of a corporation are its shareholders

Corporations continued Shareholders are individuals who have bought stock in the company Shareholders elect a board of directors to oversee the major policies and decisions The corporation has a life of its own and does not dissolve when ownership changes

Corporations - Advantages Shareholders (the owners of the corporation) have limited liability for the corporation’s debts or judgments against the corporation The most they can lose is their investment in the corporation Shareholders receive a share of the corporation’s profits through dividends Corporations can raise additional funds through the sale of stock.

Corporations - Disadvantages The process of incorporation requires more time and money than other forms of organization Corporations are monitored by federal, state, and some local agencies, and as a result may have more paperwork to comply with regulations Incorporating may result in higher overall taxes Corporate income is taxed Dividends are taxed A business license is a contractual agreement to sell a company’s products or services in a designated geographical area.

Corporation Examples The Most Successful Corporations In The U.S. J.P. Morgan Chase & Co Walt Disney Company  Deere and Co Johnson & Johnson  Amazon.com

Alternative Ways to Do Business Franchise Nonprofit Organization Cooperative

Franchise Contractual agreement to sell a company’s products or services in a designated geographic area To run a franchise, you have to invest money and pay the franchisor an annual fee or a share of the profits In return, the franchisor offers a well-known name and a business plan It provides management training, advertising, and a system of operation

Examples of Franchises Great Clips McDonald’s Sonic Re/Max Subway Days Inn Taco Bell Jimmy Johns Dunkin Donuts

Franchise - Advantages Easy to start You can rely on the proven methods and product of the parent company The name of the parent company can be a big draw for customers

Franchise - Disadvantages The franchisor is often very strict about how the business is to run Your business must operate like every other franchise You might be limited in what products or services you can offer customers https://www.franchiseopportunities.com/find-a-franchise/state/illinois

Nonprofit Organization A type of business that focuses on providing a service rather than making a profit The largest non-profit organization in the United States is the Bill and Melinda Gates Foundation, which has an endowment of approximately $27 billion.

Cooperative An organization owned and operated by its members for the purpose of saving money on the purchase of goods and services Ocean Spray is a cooperative of cranberry growers

Types of Businesses Producers Processors Manufacturers Intermediaries Service

Producer A business that gathers raw products in their natural state A farmer who grows wheat in Kansas is a producer Industries that are producers include agriculture, mining, fishing, and forestry

Processors Change raw materials into more finished products. Wheat turned into flour Crude oil into gasoline Iron ore into steel Paper mills and oil refineries are types of businesses that process raw goods.

Manufacturers Businesses that make finished products out of processed goods A bakery makes bread out of flour A furniture factory makes tables out of lumber An automotive plant makes cars out of steel, glass, and plastic

Intermediaries A business that moves goods from one business to another Wholesaler: buys goods from manufacturers in huge quantities and resells them in smaller quantities to their customers, usually other companies Retailer: purchases goods from wholesalers and resells them to the consumer, or the final buyer of the goods

Service Businesses that provide services rather than goods Some examples are companies with the following business activity: financial, insurance, real estate, hotels, restaurants, coffee shops, food courts, hair-dressing and beauty shops

Chapter 6 Book Work Fast Review Page 91 1-4 Fast Review Page 93 Using Business Key Words Page 94 1-15 (You only have to write the vocabulary term)