1. Business Structures

2. Business Ownership Opportunities
If you were to start your own business what would it be?
How would you enter a business?
Four ways:
Purchase an existing business
Take over a family business
Start a new business
Purchase a franchise
What organizational form will it take?

3. Forms of Business Organization
Sole Proprietorship- A business owned by one person who receives all the profits and is responsible for all the debts incurred by the business.
Partnership- A business with two or more owners who share the firm's profits and losses.
Corporation- A legal entity owned by shareholders whose liability for the firm's losses is limited to the value of the stock they own.
Franchise- A legal agreement to sell a parent company’s product or service in a geographic area.

4. Sole Proprietorship Advantages Disadvantages
All business decisions are the
owner’s
Low start-up costs
All profits go to the owner
Greater freedom
Very little government control (keep accurate tax and employee records)
Income taxes once
Unlimited liability- personally responsible for any losses.
Long working hours
Difficult to obtain financial
capital
All business decisions and risks are the owner’s
Limited life span

5. Partnership Advantages Disadvantages Easy to form Low start-up costs
Divided liability
Easier to obtain financial
capital
Opportunity to gain
complementary skills
Income taxes once
Unlimited liability (in a general
partnership)
Divided authority
Divided profits
Can be difficult to find the right
partner
Potential disagreements among
partners
Limited life span
Articles of Partnership –Legal document that clearly lays out the responsibilities of the each partner, how the profits are distributed, and how much of the company each owns. Limited partnership is less risky. The limited partnership is only responsible for their contribution.

6. Corporation Advantages Disadvantages Limited liability
Specialized managerial
functions
Easier to raise financial capital
Perpetual existence
Freely transferable shares of
stock
Greater government regulation
Expensive to organize
Double taxation
Not easily dissolved
A lot of paperwork
Extra costs for lawyers, fees,
etc.

7. Corporations
Charter- a government document that gives permission to create a corporation.
Stockholders- purchases share or shares of ownership in a corporation.
Public vs. Private
Public – is a company who offers its securities for sale to the general public.
Private- are owned by a relatively small number of shareholders who owns stocks that are not traded publicly, many family-owned.
“S” Corporation-is treated as a partnership and not as a corporation for tax purposes. It requires Articles of Incorporation which outlines the primary rules governing the management of a “S” corporation.

8. Franchise Advantages Disadvantages Proven idea Brand name
Support from franchisor
Exclusive rights
Established relationships with suppliers
Financing may be easier than
starting from scratch
Restrictions from franchisor
Royalty fees – a percent of the gross profits
May be expensive to own and
operate
Stiff penalties from franchisor if business is sold or closed
Added costs for legal and
accounting services
Loss of individuality
Disclosure statement should be carefully negotiated to outline all rules, regulations and fees upfront.

9. Profit vs. Nonprofit
Profit organizations use resources to produce goods and services in hopes of earning a profit for their owners.
Ford Motor Company
Nonprofit organizations work in a businesslike way to promote the collective interests of its members rather than to seek financial gain for its owners.
American Red Cross

10. Nonprofit Organizations
Community or civic organizations-ex. Churches, Schools
Cooperatives- Consumer, Service, Producer – Bulk Food stores, Credit Unions, Farmers Markets
Government-helping to make sure the economy runs smoothly while providing goods and services.
Other Organizations
Labor Unions- UAW, an economic institution that represents an organized group of workers (by industry or by type of worker regardless of the industry) to negotiate with management by means of collective bargaining.
Professional Organizations-AMA
Business Organization- Chamber of Commerce, BBB
Households