Objective 2.01 Understand the types of business ownership. 1

Business Vocabulary What is CAPITAL? Cash and other Assets (ASSETS=Equipment, Land, Buildings) What are Liabilities? What is owed

Types of Business Ownership Sole Proprietorship Partnership Corporation 3

Sole Proprietorship How many people are considered for ownership? Who may manage a sole proprietorship? Formation may vary by states 4

Sole Proprietorship Advantages For owner Easy to form Complete control of business Recipient of 100% of the profit One time taxation 5

Sole Proprietorship Disadvantages Limited capital Unlimited liability Types of liabilities Employment Accidents and injuries on premises Company vehicle-related Product-related Errors and omissions Limited to the lifetime of owner 6

Sole Proprietorship Termination Decision or Death Investment $$ =personal cash gifts borrowed Do you know anyone who owns a Sole Proprietorship? 7

Partnership 2 or more people who are co-owners of a business for profit Who may manage a partnership? A manager or the owners Formation varies by each state 8

Partnership Advantages More capital and credit available Work load more evenly shared Losses are also shared 9

Partnership Disadvantages Profits are shared Decisions are made jointly 10

Partnership Disadvantages Unlimited liability Types of liabilities Employment Accidents and injuries on premises Company vehicle-related Product-related Errors and omissions 11

Partnership Partnerships are formed by an agreement to the conditions of “Partnership of Agreement” “Partnership of Agreement” legal document that explains the partnership Partnerships are terminated by actions of the partners, bankruptcy, death or court order Investment $$ =personal cash gifts borrowed 12

Corporation An entity with the legal authority to act as a single person Managers:Managers Board of Directors Shareholders Formed by filing Articles of Incorporation with the state government 13

Corporation Ownership Determined by purchase of stock A stockholder, or shareholder, owns a ‘piece’ of the company One share of common stock equals one vote 14

Corporation Advantages Capital easy to obtain Limited liability for shareholders Possibility of unlimited lifetime of business 15

Corporation Disadvantages Double taxation: profits and earnings Government regulations Operations controlled by shareholders and board of directors instead of original owner(s) Example: 10 years after founding Apple, Steve Jobs was fired by the board of directors. 16

Corporation Disadvantages 17 Disadvantages Types of liabilities Employment Accidents and injuries on premises Company vehicle-related Product-related Errors and omissions Directors and officers

Corporation Corporations are terminated by charter or have an unlimited lifetime Investment $$ = Sale of Stock (Purchase of stock by outside investors) 18