1. Understand marketing and business management
Essential Standard 7.00

2. Apply knowledge of business ownership to establish and continue business operations.
Objective 7.01

3. Types of Business Ownership
Sole Proprietorship
Partnership
Corporation
Cooperative
Franchise
Which type of ownership is the most common in the United States?
Which types of ownership counts for the most revenue in the United States?
Which type of ownership is the most common in the United States?
Sole proprietorship – 72%
Partnership – 20%
Corporation – 5%
Other – 3%
Which type of ownership counts for the most revenue in the United States?
Corporation – 85%
Partnership – 8%
Sole proprietorship – 5%
Other – 2%

4. Sole Proprietorship How many people own a sole proprietorship?
Who manages a sole proprietorship?
How are sole proprietorships formed?
How many people own a sole proprietorship?
One
Who manages a sole proprietorship?
Owner may manage business, or choose to have someone manage for them, and participate in daily operations and decision-making.
How are sole proprietorships formed?
Easiest form of ownership to start. Varies between states. In North Carolina, register your business name with the appropriate government entity and then get a business license and/or permits.

5. Sole Proprietorship Advantages & Disadvantages
Advantages for Owner
Disadvantages for Owner
Easy to form
Complete control of business
Recipient of 100% of the profit
One time taxation
Limited capital
Unlimited liability
Limited lifetime

6. Sole Proprietorship continued
How is a sole proprietorship terminated?
What are some sources of funding that may be used for investment?
What are some local examples?
How is a sole proprietorship terminated?
Decision or life of owner
What are some sources of funding that may be used for investment?
Personal, gifts, borrowed, and others may vary
What are some local examples?
Answers will vary.

7. Partnership
How many people are considered for a partnership ownership?
Who manages a partnership?
How is a partnership formed?
How many people are considered for a partnership ownership?
Association of two or more people to carry on as co-owners of a business for profit.
Who manages a partnership?
Determined by partnership agreement. It may be one or more partners, or someone that has been hired to manage the day-to-day operations.
How is a partnership formed?
With a partnership agreement. Some states only require a verbal agreement but it is better to have a written agreement. Most states also require a business name and the name of each partner be registered. In North Carolina, partners must choose a name for their business, register the business name with the appropriate government entity, sign a partnership agreement, and then get a business license and/or permits.

8. Partnership Advantages & Disadvantages
Advantages for Partners
Disadvantages for Partners
Unlimited liability
Limited lifetime – if partner leaves or dies
Profits are shared
Decisions are made jointly
Hard to add other partners
Easy to form
More capital and credit available
Work load more evenly shared
Losses are also shared

9. Partnership continued
How is a partnership terminated?
What are some sources of funding that can be used for investments by partners?
What are some examples of partnerships? Can you name some local examples?
How is a partnership terminated?
Partnerships are terminated by actions of the partners, bankruptcy, death, and/or court order.
What are some sources of funding that can be used for investment by partners?
Personals of partner(s), gifts, borrowed, and others may vary
What are some examples?
South Railroad Limited Partnership
Eden Limited Partnership
(Law and accounting firms are usually good examples for local partnerships.)

10. Specialized Partnerships
Why would an investor choose a limited liability partnership?
Why would businesses choose to enter into a joint venture?
What is meant by the saying “by proof of existence”?
Why would an investor choose a limited liability partnership?
If an investor does not want to lose more than the amount of their investment and does not care to be involved in every day operations.
Why would businesses choose to enter into a joint venture?
When the businesses only want to be partners for a limited time and for a specific reason/project.
What is meant by the saying “by proof of existence”?
This is used for partnerships or joint ventures that don’t have a formal agreement and just conduct business together. In this case, partners may or may not be aware of their formed partnership.

11. Participation in the Business Relationship to the Public
Types of Partners
Type of Partner
Participation in the Business
Relationship to the Public
Degree of Liability
General*
Active
Known
Unlimited
Dormant
Not active
Unknown
Limited
Secret
Silent
*Every partnership must have at least one general partner.

12. Corporation Who owns a corporation? How is ownership determined?
Who manages a corporation?
How are corporations formed?
Who owns a corporation?
The stockholder (shareholders).
An entity with the legal authority to act as a single person.
How is ownership determined?
Determined by purchase of stock
A stockholder, or shareholder, owns a ‘piece’ of the company
One share of common stock equals one vote
Who manages a corporation?
Managers, board of directors, and shareholders
How are corporations formed?
Filing of an article of incorporation with state government. The business must create corporate bylaws, name a board of directors, and issue shares of stock. In North Carolina, the business must choose a name, choose board of directors, file articles of incorporation, create bylaws, hold a meeting, issue stock, obtain licenses, determine tax obligations, and open a bank account for the business.

13. Corporation Advantages & Disadvantages
Disadvantages of Corporations
Advantages of Corporations
Double taxation: profits and earnings
Subject to more laws than other types of ownership
More difficult to form
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.
Capital easy to obtain
Limited liability for shareholders
Can invest without having to manage day-to-day operations
Possibility of unlimited lifetime of business
Decision-making is shared

14. Corporation continued
How is a corporation terminated?
What is the source of investment for corporations?
What are some examples?
How is a corporation terminated?
Corporation may have unlimited life. Determined by charter or articles of dissolution, and must be approved by the majority of the board of directors and/or stockholders (shareholders)
What is the source of investment for corporations?
Purchase of stock shares
What are some examples?
Walmart, Microsoft, Ford Motor Company, Coca-Cola, Delta

15. 3 Ways for Corporations to grow
Consolidation: combining two or more firms through purchase, merger, or ownership transfer to form a new firm.
Expansion: a business strategy in which growth is obtained by increasing the number of stores in which customers can buy a company’s products and services.
Merger: Voluntary joining of two firms on roughly equal terms into one new legal entity.
Consolidation: combining two or more firms through purchase, merger, or ownership transfer to form a new firm. Combining assets, equity, liabilities, and operating accounts of a parent firm and it’s subsidiaries into one financial statement.
Expansion: a business strategy in which growth is obtained by increasing the number of stores in which customers can buy a company’s products and services.
Merger: Voluntary joining of two firms on roughly equal terms into one new legal entity. Mergers are effected by exchange of the pre-merger stock for stock of the n new firm. Owners of each pre-merger firm continue as owners, and the resources of the merging entities are pooled for the benefit of the new entity.

16. Specialized Corporations
What is special about an S-corporation?
Why would a small business operate as an limited liability company (LLC)?
Who benefits from services of a nonprofit corporation?
What is special about an S-corporation?
This type of corporation treats each partner/owner as an individual by taxing them only one time.
Why would a small businesses operate as Limited liability company (LLC)?
Used by small businesses to receive limited liability protection. No articles of incorporation or bylaws are needed.
Who benefits from services of nonprofit corporation?
Benefits the public and is exempt from taxation. May get grants from the individuals or businesses to raise funds.

17. Franchises
Franchise: a written contract granting permission to operate a business to sell products and services in a set way. Business-format franchise: a franchising arrangement where the franchisor provides the franchisee with an established business, including name and trademark, for the franchisee to run separately. Product trade-name franchise: a franchising agreement where manufacturers allow retailers to distribute products and use names and trademarks.
Franchise: a written contract granting permission to operate a business to sell products and services in a set way.
Business-format franchise: a franchising arrangement where the franchisor provides the franchisee with an established business, including name and trademark, for the franchisee to run independently.
Product trade-name franchise: A product franchise is a franchising agreement where manufacturers allow retailers to distribute products and use names and trademarks.