1. Business Ownership Chapter 6
Business Structures
Business Ownership
Chapter 6

2. Major Types of Business Ownership
Sole proprietorship
Partnership
Corporation

3. Sole Proprietor
One-person business that is not registered with the state as a corporation or a limited liability company (LLC).
Easy to set up and maintain.
The simplest of business structures,
You may have to comply with local registration, business license, or permit laws to make your business legitimate.
You are personally responsible for paying both income taxes and business debts.
Can be held personally liable for any business-related obligation. This means that if your business doesn't pay a supplier, defaults on a debt, or loses a lawsuit, the creditor can legally come after your house or other possessions.

4. Ownership Differences
Sole proprietorship—One owner; easy startup.
Partnership—two or more owners; articles of partnership
Corporation—Many owners; must have written permission to operate.

5. Sole Proprietorship Advantages Disadvantages Easy to start
Owner has control and is the boss
Owner gets all profits.
Makes all business decisions.
Disadvantages
Capital is limited to what the owner can supply.
Owner is liable for all debts.
Can lose personal property of business fails.
Long hours & hard work.

6. Partnership Advantages Disadvantages Fairly easy to start
Has articles of partnership
More sources of capital
More business skills are available
Disadvantages
Each partner is liable for business debts made by all partners
Each partner shares profits

7. Corporations Advantages Disadvantages
More sources of capital available
Specialized management skills available
Owners are liable up to the amount of their investments
Ownership can be easily transferred through sale of stock
Disadvantages
Difficult/complex process to start
Owners don’t have control of daily decisions unless they are an officer of the company.
Activities are limited to those stated in the certificate of incorporation.

8. Review Questions!
Name two advantages and two disadvantages of each type of business ownership.

9. Five Functions of Management
Managers
Plan
Organize
Staff
Lead
control

10. Organization Chart

11. Staffing
Hiring
Training
Appraising
rewarding

12. Leading Managers must lead Effective leaders
Inspire works to do their jobs.
Accept their share of responsibility in achieving goals of the business
Have good human relations
Excellent communication skills

13. Controlling Comparing what actually happens with what was planned.
Page 73

14. Articles of Partnership
Name of new business
Amount each partner invests
Salary requirements of each partner
Disbursements of profits
Responsibilities of each partners
Partnership dissolution

15. Creating Corporations
Business needs to expand and grow
To do so requires more money
Forming a corporation can do this.
Plan for corporation must be drafted.
Divide the company up by selling shares

16. Board of Directors
Group of people responsible for guiding the company.
Board elects executive officers
President (CEO)
Vice President
Corporate lawyer

17. Specialized Business Organization
Franchises
Cooperatives
Non-profit organizations

18. Franchise
Written contract giving permission to sell someone else’s product or service.
Can be operated as a proprietorship, partnership, or corporation.
Look on page 77

19. Franchise Advantages Relatively easy to start
Franchisor often helps the franchisee get started
Franchisor helps in selling product by giving national advertising.

20. Franchise Disadvantages
Require large investments of capital to start
Very competitive
Often fail because they were not competitive or in a good location.

21. Franchise Agreement States the duties and rights of both parties
Franchisee agrees to run the business in a certain way.
Name of the business
Products or services offered
Design and color of the building
Prices of the product or service
How employees dress

22. Cooperatives
A co-op is a business that is owned and controlled by the very same customers who use its services.
The voice of every person makes a difference.
The economic benefits of a cooperative are given back to the members, reinvested in the co-op or used to provide member services.

23. REA
The rural electric cooperatives began back in 1935 when the Rural Electric Administration (REA) was created with the help of Franklin D. Roosevelt.
The REA's goal was to provide electricity to the rural areas and jobs during hard times.
The idea was to provide established member-owned utility companies with federal REA loans. The objective was to bring electric power to the countryside when no one else would.

24. Consumer’s Cooperative
A business owned by its customers.
Employees can also generally become members.
Members vote on major decisions, and elect the board of directors from amongst their own number.
A well known example in the United States is the REI (Recreational Equipment Incorporated) co-op
Houchen’s Grocery

25. Producer’s Cooperative
Organization of producers who cooperate in the areas of buying supplies and equipment and of marketing.
Dairy farms
Chicken producers
Family farms

26. Non-Profit Corporations
Municipalities
A town, city, or district possessing corporate jurisdiction

27. Two Ways a Cooperative is Controlled
Each owner-member may have one vote
Each member vote may be based on the amount of service he or she has bought from the cooperative.

28. Questions?