Pump Primer Define the term entrepreneur.Define the term entrepreneur. Explain the difference between sole proprietorship, partnership, & corporation.Explain the difference between sole proprietorship, partnership, & corporation. CHAPTER 7

Forms of Business Ownership

Objectives: Define entrepreneur, sole proprietorship, partnership, & corporationDefine entrepreneur, sole proprietorship, partnership, & corporation Compare the advantage and disadvantages of organizing a business as a corporation, partnership, or sole proprietorship.Compare the advantage and disadvantages of organizing a business as a corporation, partnership, or sole proprietorship. Explain limited liability.Explain limited liability. Describe the Scriptural principles that apply to Christians involvement in partnerships.Describe the Scriptural principles that apply to Christians involvement in partnerships. Define and describe two types of corporationDefine and describe two types of corporation Explain the significance of stock to a corporation.Explain the significance of stock to a corporation. Give examples of laws and regulations that affect how corporations and other forms of businesses are formed and operate.Give examples of laws and regulations that affect how corporations and other forms of businesses are formed and operate. CHAPTER 7

Biblical Integration: In order for a Christian entrepreneur to be successful in God's eyes, they must be diligent in all areas of their business.In order for a Christian entrepreneur to be successful in God's eyes, they must be diligent in all areas of their business. CHAPTER 7

Forms of Business Ownership Sole proprietorshipSole proprietorship PartnershipPartnership CorporationCorporation CHAPTER 7 p. 128

Sole Proprietorship One ownerOne owner Most popular form of business ownershipMost popular form of business ownership CHAPTER 7 pp

Sole Proprietorship Advantages:Advantages: freedom to enter and exit the market easilyfreedom to enter and exit the market easily freedom from outside controlfreedom from outside control freedom to retain informationfreedom to retain information freedom from paying excessive taxesfreedom from paying excessive taxes freedom from being an employeefreedom from being an employee CHAPTER 7 pp

Sole Proprietorship Disadvantages:Disadvantages: unlimited personal financial liabilityunlimited personal financial liability limited management and employee skillslimited management and employee skills limited lifelimited life limited availability of moneylimited availability of money CHAPTER 7 pp

Partnership Business enterprise with two or more ownersBusiness enterprise with two or more owners Least popular form of business ownershipLeast popular form of business ownership CHAPTER 7 pp

Partnership Questions:Questions: Who are the partners?Who are the partners? What is each partner responsible to do?What is each partner responsible to do? How are profits to be divided?How are profits to be divided? CHAPTER 7 pp

Partnership Questions:Questions: How may a partner withdraw from the partnership?How may a partner withdraw from the partnership? How can the partnership be dissolved?How can the partnership be dissolved? CHAPTER 7 pp

Partnership Advantages:Advantages: greater management skillsgreater management skills greater retention of competent employeesgreater retention of competent employees greater sources of financinggreater sources of financing ease of formation and freedom to manageease of formation and freedom to manage CHAPTER 7 pp

Partnership Disadvantages:Disadvantages: unlimited personal financial liabilityunlimited personal financial liability uncertain lifeuncertain life conflicts between partnersconflicts between partners CHAPTER 7 pp

Partnership Limited partnershipsLimited partnerships at least one general partnerat least one general partner unlimited personal financial liabilityunlimited personal financial liability makes most business decisionsmakes most business decisions CHAPTER 7 pp

Partnership Limited partnershipsLimited partnerships at least one limited partnerat least one limited partner shares in profitsshares in profits no management responsibilitiesno management responsibilities personal financial liability limited to the amount of his investmentpersonal financial liability limited to the amount of his investment CHAPTER 7 pp

Partnership Scripture and partnershipsScripture and partnerships “unequal yoking”“unequal yoking” suretysurety act of becoming security for or pledging to undertake another’s debtact of becoming security for or pledging to undertake another’s debt CHAPTER 7 pp

Incorporation In a corporation, the business is its own organization, independent of and separate from the ownersIn a corporation, the business is its own organization, independent of and separate from the owners separate entityseparate entity CHAPTER 7 pp

Incorporation Types of CorporationsTypes of Corporations private corporations: owned by private citizensprivate corporations: owned by private citizens public corporations: owned by the general public and managed by the governmentpublic corporations: owned by the general public and managed by the government TVA, AmtrakTVA, Amtrak CHAPTER 7 pp

Incorporation Ownership of a corporationOwnership of a corporation buying shares of stockbuying shares of stock CHAPTER 7 pp

Incorporation AdvantagesAdvantages limited personal financial liability of stockholderslimited personal financial liability of stockholders experienced management and specialized employeesexperienced management and specialized employees CHAPTER 7 pp

Incorporation AdvantagesAdvantages continuous lifecontinuous life ease in raising financial capitalease in raising financial capital CHAPTER 7 pp

Incorporation DisadvantagesDisadvantages higher taxeshigher taxes greater governmental regulationgreater governmental regulation lack of secrecylack of secrecy impersonalityimpersonality rigidityrigidity CHAPTER 7 pp

Other Types S CorporationS Corporation Limited Liability Company (LLC)Limited Liability Company (LLC) CHAPTER 7 pp

S Corporation Profits and losses are not taxed at the corporate levelProfits and losses are not taxed at the corporate level Earnings are reported on the owner’s personal tax returns in much the same way as sole proprietorships and partnerships.Earnings are reported on the owner’s personal tax returns in much the same way as sole proprietorships and partnerships. Limited to one class of stock and shareholders are limited in number and by U.S. residency.Limited to one class of stock and shareholders are limited in number and by U.S. residency. Limited liabilityLimited liability Easier to raise capital and to transfer ownershipEasier to raise capital and to transfer ownership No corporate taxes, but have regulations just like a corporation.No corporate taxes, but have regulations just like a corporation. CHAPTER 7 pp

BUSINESS ABBREVIATIONS Ltd. (Limited Liability)*Ltd. (Limited Liability)* PC (Professional Corporation)*PC (Professional Corporation)* LLC (limited liability Company)*LLC (limited liability Company)* SA (Anonymous Society)*SA (Anonymous Society)* p.l.c. (Publicly Limited Company)*p.l.c. (Publicly Limited Company)* Inc. (Incorporation)*Inc. (Incorporation)* * These abbreviations reflect the legal separation of owners and the corporations. Corp. (Corporation)Corp. (Corporation) Co. (Company)Co. (Company)

Break-up into groups of two or three.Break-up into groups of two or three. Look over the list of companies and place them into the correct category of business types.Look over the list of companies and place them into the correct category of business types. ACTIVITY 1

ACTIVITY 2 Using your textbook and lecture notes complete the chart with your partner(s). Define the term, then list all of the advantages and disadvantages for each form of business.Define the term, then list all of the advantages and disadvantages for each form of business.