Types of Business Ownership

Standard/Element BMA-IBT-7: Demonstrate an understanding of entrepreneurship through recognizing a business opportunity, how to start a business based on the recognized opportunity, and basics of how of operate and maintain that business. 7.6: Differentiate between the types of business ownership.

Types of business ownership Sole Proprietorship Partnership Franchise Corporation

Sole proprietorship A business owned by only one person Advantages Complete control Sole decision maker No corporate tax payments Minimal legal costs Few formal business requirements Disadvantages Personally liable for all debt Assumes all risks of business Business decisions rely solely on you Investors are slow to invest

Partnership A business owned by two or more people who share its risks and rewards Advantages Easy to format Diverse skills ad expertise Large resources Flexibility of operations Sharing of risks Benefits of unlimited liability Promptness in decision making Disadvantages Limited capital Unlimited liability Instability Risk of implied authority Lack of harmony Non-transferability of interest Lack of public confidence

corporation Company that is registered by a state and operates apart from its owners. Advantages Shareholders have limited responsibility Can obtain more capital through sale of actions Can deduct the cost of benefits offered to employees Disadvantages Requires more time to integrate Supervised and subject to rules of entities Payment of more taxes

franchise Contractual agreement to use the name and sell the products and services of a company in a designated geographic area. Advantages Owning an established business A known brand Simpler business financing Business relationships Support and security Less likely to fail Disadvantages Having no control Ties to suppliers Risks from others Franchise costs Cut of your profit

Student should complete worksheet on Matching Activity

Other useful terms to know Unlimited liability: a liability that holds the owner fully responsible for a company’s debts Limited liability: A claim that holds a firm's owners responsible for no more than the capital that they have invested in it. Cooperative: Organization that is owned and operated by its members. Nonprofit organization: A type of business that focuses on providing a service rather than making a profit. Sole: having no sharer; being the only one Income: A gain or recurrent benefit usually measured in money that derives from capital or labor. Regulate: to bring under control of law or constituted authority

Business ownership project Please see handout provided