Understanding the Types of Business Ownership POB 2.01 Outline and Review Understanding the Types of Business Ownership .

Main Types of Business Ownership Table Sole Proprietorship Partnership Corporation Owner(s) One person Two or more people One or more shareholders (stockholders), who have one vote per share Manager(s) May be owner. Participate in all day-to-day operations Determined by partnership agreement; may be one or more partners Managers, board of directors and shareholders Formation Begin buying and selling goods and services May vary by state With a partnership agreement. Varies by state Filing of an article of incorporation with state government

Sole Proprietorship Partnership Corporation Advantages Easy to form Complete control of business Recipient of 100% of the profit One time taxation More capital and credit available than a sole proprietor ship Work load shared Losses shared Capital easy to obtain Limited liability for shareholders Unlimited lifetime Can invest without managing day-to-day operations Decision-making is shared Disadvantages Limited capital Unlimited Liability Limited lifetime of owner Profits shared Decisions made jointly Unlimited liability depending on partnership type Limited lifetime Difficult to add partners Double taxation: profits and earnings Government regulations More difficult to form Operations controlled by shareholders and board of directors

Decision or life of owner Sole Proprietorship Partnership Corporation Termination Decision or life of owner Actions of the partners, bankruptcy, death, and/or court order May have unlimited lifetime. If needed, determined by charter or article of dissolution Source(s) of investment Personal, gifts, borrowed, and others may vary Personals of partner(s), gifts, borrowed, and others may vary Purchase of stocks Examples of business Ownership Answers will vary South Railroad Limited Partnership Eden Limited Partnership Bank of America Corporation Lowe’s Home Improvement Store Examples of liabilities Employment: Manager fires an employee that missed significant days from work Accidents and injuries on premises: Costumer breaks a leg while on business property Accidents and injuries on premises: Driver runs into a building while driving company’s car Product-related: Toddlers are easily injured by a sharp edge of a toy Errors and omissions: Employee accidently damages a costumer’s property Directors and officers: One food ingredient that may cause cancer is intentionally omitted from package

Other types of Business Ownership Types of Partnerships Dormant partner General partner Limited liability partner Secret partner Silent partner Specialized corporations Subchapter/S-corporation Limited Liability company Non profit corporation Cooperatives A business that is owned and ran jointly by its members Franchise When a company allows other businesses to sell its goods for a share of the profit Ex. McDonald’s chain restaurants

2.01 Understand The Types of Business Ownership Questions By. Dana C. And Hannah D.

1. Tami prefers working alone in her auto body shop and being in control of the daily activities. This type of business ownership ADVANTAGE over corporation is: 2. Mary owns stock for several companies, which she plans to pass ownership to her grandchildren. She chose this form of ownership over sole proprietorship because of the ADVANTAGE of: Control of Decisions. Potential of Unlimited Life.

3. Tami opened an auto body shop after repairing a couple of cars to the high satisfaction of customers. She has experienced which ADVANTAGE over a corporation? 4. Tami wants to invest money in shares of stock. She would have to pay taxes on her earnings twice. Which is an ADVANTAGE of a sole proprietorship over a corporation? Ease of Formation. Single Taxation.

5. Todd decided to form a corporation instead of a sole proprietorship because of which ADVANTAGE listed below? 6. Hank has ownership, even without liability over his initial investment, along with George for a local business. This is an example of what type of business ownership? Limited Liability. Partnership.

7. Even though a company may sell shares of stock, it relies on a central body of people for financial directions. This is an example of type of business? 8. Chun purchased 150 shares of stock in the Panasonic Company. How many votes will she have at the next stockholder’s meeting? Corporation. 150

9. Carlos ignores minor decisions in his business even though his name is on the sign as one of the owners. This is an example of which type of business ownership? 10. Several small businesses that sell organic foods have joined together to increase their chances to pay lower prices for inventory. This is an example of what type of business? Partnership Cooperative.

11. Since Jane’s corporation has become so popular, she has decided to allow other businesses to sell her products. This is an example of what type of business? 12. Both Bob and Jeri contributed to the expansion of their business to sell more brands of tires. They both experienced which ADVANTAGE of a partnership over a sole proprietorship? Franchise. More Capital Available.