Introduction to Business Chapter 6 Business Ownership

Sole Proprietorship A business owned by only one person

Sole Proprietorship Ownership Start-up Costs TaxesLiability Responsibility for Decisions One person Very hard to get financing; financing usually comes from owner, family and friends Owner pays income taxes Unlimited (full responsibility for your company’s debts) All reside with the owner; all the glory and all the blame goes to the owner

Sole Proprietorship AdvantagesDisadvantages 1.Easy to start 2.Get to be own boss 3.Keep all profits 4.Taxes are usually low 1.Have to pay for everything 2.Might also lack business skills 3.Unlimited liability

Partnership A business owned by two or more persons who share the risks and rewards

Partnership Ownership Start-up Costs TaxesLiability Responsibility for Decisions Two or more people All partners can contribute which spreads the costs Owners pay income taxes UnlimitedEach partner can make decisions for all the partners, whether they agree or not

Partnership AdvantagesDisadvantages 1.Easy to start 2.Easier to obtain capital 3.Partners might bring different skills 1.Share profit 2.Might not get along with partner 3.Unlimited legal and financial liability

Corporation A business owned by many people but treated by law as one person

Corporation Ownership Start-up Costs TaxesLiability Responsibilit y for Decisions StockholdersFinancing generally easy to get; also can acquire funds selling stock (shares of ownership) Corporation is taxed; owners are also taxed on income Limited (if company loses money, stockholders only lose what they invested) Board of Directors elected by stockholders; officers carry out decisions of the board

Corporation AdvantagesDisadvantages 1.Limited liability 2.Corporation doesn’t end if owners sell their shares 3.Raise more capital by selling new shares 1.Pay more taxes 2.More difficult to start 3.Running it is more complicated

Franchise A contractual agreement to sell a company’s products or services in a designated geographic area

Franchise OwnershipAdvantagesDisadvantages One or more people 1.Easy to start 2.Established name 1.Must operate as franchisor wants 2.Limited in what products or services you can offer

Nonprofit Organization A type of business that focuses on providing a service rather than making a profit

Nonprofit Organization OwnershipAdvantagesDisadvantages One or more people 1.Doesn’t have to pay taxes 1.No profit 2.Run by a board of directors

Cooperative An organization owned and operated by its members for the purpose of saving money on the purchase of certain goods and services

Cooperative OwnershipAdvantagesDisadvantages Group of people with same interest 1.Pool resources 2.Save money as a group 3.Pay less in taxes than regular corporations 1.Decisions are made as a group