PowerPoint Presentation  Section 7.1  Pages

What you’ll learn  The pros and cons of forming a sole proprietorship  The advantages and disadvantages of partnerships  The differences between types of partnerships 7.1 Types of Business Ownership

Why it’s important  The easiest businesses to form are sole proprietorships and partnerships. 7.1 Types of Business Ownership

Why it’s important  One should know the pros and cons of sole proprietorship and partnership before choosing either form of ownership. 7.1 Types of Business Ownership

Key Terms sole proprietorship liability liability unlimited liability unlimited liability partnership partnership general partners general partners limited partners limited partners 7.1 Types of Business Ownership

Springboard Would you prefer to start a business on your own, with a partner, or with several partners? Why?

I. SOLE PROPRIETORSHIP A. In a sole proprietorship, the owner is the only one responsible for business activities. B. Nearly 76% of all U.S. businesses are sole proprietorships. 7.1 Types of Business Ownership

II. WHAT IS A SOLE PROPRIETORSHIP? A. The owner of a sole proprietorship is the only one who receives the profits. 7.1 Types of Business Ownership

B. A sole proprietor is completely responsible for liability, or money owed to others. 7.1 Types of Business Ownership

III. ADVANTAGES A.Easy and inexpensive to operate B. Allows an owner complete authority

7.1 Types of Business Ownership C. The least regulated form of ownership D. Taxed at the personal rate of the owner

7.1 Types of Business Ownership IV. Disadvantages A. The owner of a sole proprietorship has unlimited liability for all debts and actions of the business.

7.1 Types of Business Ownership B. Debts incurred may have to be paid from the owner’s personal assets.

7.1 Types of Business Ownership Critical Thinking Given the disadvantages, why do you think sole proprietorships are so popular?

7.1 Types of Business Ownership V. HOW TO SET UP A SOLE PROPRIETORSHIP A. File a DBA (for “doing business as”).

7.1 Types of Business Ownership B. Request an Employer Identification Number (EIN) from the Internal Revenue Service to track federal income tax withheld and federal income tax returns.

7.1 Types of Business Ownership VI. PARTNERSHIPS A. In a partnership, more than one person shares the business decisions and outcomes.

7.1 Types of Business Ownership B. Partners who own a business share the assets, liabilities, and profits.

7.1 Types of Business Ownership VII. GENERAL VS. LIMITED PARTNERS A. General partners have unlimited personal liability and take full responsibility for the management of the business.

7.1 Types of Business Ownership B. Limited partners’ liabilities are limited to their investment, and cannot be actively involved in running the business.

7.1 Types of Business Ownership VIII. OTHER TYPES OF PARTNERSHIPS A. A joint venture is a type of partnership where two companies join to complete a specific project.

7.1 Types of Business Ownership B. A strategic alliance is a partnership in which two businesses work together for mutual benefit.

7.1 Types of Business Ownership IX. ADVANTAGES A.Partnerships are inexpensive to create. B. Partnerships allow partners complete control.

7.1 Types of Business Ownership C.Partnerships can share ideas and secure investment capital more easily and in greater amounts.

7.1 Types of Business Ownership X. DISADVANTAGES A.It can be difficult to dissolve one partner’s interest in the business without dissolving the entire partnership.

7.1 Types of Business Ownership B. Personality conflicts can result in breakups. C. Partners can be held liable for each other’s actions.

7.1 Types of Business Ownership XI. MAKING A PARTNERSHIP WORK A.Share business responsibilities. B. Put things in writing. C. Always be honest about how the business is doing.

7.1 Types of Business Ownership End of Section 7.1