Chapter 2 – Forms of Business Ownership

FORMS OF BUSINESS OWNERSHIP SOLE PROPRIETORSHIP - Owned by one person FRANCHISE - One business licenses another to use its name, operating procedures and so on - As a hybrid, can have any form of ownership CO-OPERATIVE - owned by its workers or by members who buy from the business CORPORATION - Business is an artificial “person” created by law and is owned by shareholders PARTNERSHIP - Usually owned by two or more partners

 With a partner speculate about the advantages, disadvantages of each form of business ownership  What types of decisions must business people make before opening a business?

ADVANTAGESDISADVANTAGES  be your own boss  easy to start and end  profits go to the owner  unlimited liability  financing may be difficult  owner may not be familiar with all aspects of business DEFINITION A sole proprietorship is a business owned by one person. The owner has unlimited liability – if the business does poorly the owner is responsible for all the losses. Example: bicycle store owner, hot dog stand owner

ADVANTAGESDISADVANTAGES  More capital and financing  Shared responsibilities  Unlimited liability in general partnerships  Partner disagreements DEFINITION  A business with two or more partners who share the responsibilities and profits/losses.  Types of Partnerships: 1.General – most common – partners have unlimited liability 2.Limited – partners have limited liability Examples: Some lawyers (e.g. divorce, civil, real estate) will form partnerships to serve a wider client base

 John D. Rockefeller once said. It Is Better To Have A Friendship Based On A Business Partnership Than A Partnership Based On A Friendship  What do you think? Explain the position you take.

ADVANTAGESDISADVANTAGES  Limited liability  Transfer of ownership is simple  Timely and costly start-up  People who own only a few shares do not have much influence on how the company is run DEFINITION  A type of business owned by, but existing separately from, its shareholders.  4 Types of Corporations: a)Private b)Public c)Crownd)Municipal Examples: IBM, DELL, HP, APPLE, Microsoft

 Can be as small as one person or as large as a multinational  Most corporations are owned entirely by individuals, families or small groups  The ownership of large corporations is divided into many small parts, called shares or stock ◦ An individual who owns shares is called a shareholder  Some corporations sell (trade) their stock on public exchanges such as TSX, Nasdaq.

ADVANTAGESDISADVANTAGES  Less expensive goods/services  Easily set up  Decision-making process could be difficult DEFINITION  A business owned by the people, or members, who buy the products or use the services that the business offers.  The motive for running a co-operative is SERVICE not PROFIT  In Canada many co-operatives in the health care and child care sectors are not-for-profit Examples: IGA (Independent Grocers Alliance), bank unions, The Co-operative Housing Federation of Canada

ADVANTAGESDISADVANTAGES  Brand recognition  Less expensive cost of products  Uniform quality of products  Support from franchisor (ready made business)  Expensive to purchase  Monthly & advertising fees  Little/no control over menu and prices DEFINITION FRANCHISER FRANCHISEE.  In a franchise operation, one business, the FRANCHISER, licenses the rights to its business to another, the FRANCHISEE.

 How many brands can you name? ◦ Cars: ◦ Pizza Places: ◦ Cereals: ◦ Soft Drinks: ◦ Potato Chips: ◦ Running Shoes: