1. Business Ownership and Operations
Chapter 6
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2. Types of Business Ownership
Sole Proprietorship
Partnership
Corporation

3. Sole Proprietorship A business owned by only one person
Sole Proprietorship examples include small businesses, such as a single person art studio, a local grocery, or an IT consultation service. The moment you start offering goods and services to others, you form a Sole Proprietorship. It's that simple.

4. Sole Proprietorship - Advantages
Easiest and least expensive form of ownership to organize
Sole proprietors are in complete control and may make decisions as they see fit
Sole proprietors receive all income generated by the business to keep or reinvest
Profits from the business flow-through directly to the owner’s personal tax return (Schedule C)
The business is easy to dissolve, if desired

5. Sole Proprietorship - Disadvantages
Sole proprietors have unlimited liability and are legally responsible for all debts against the business
Their business and personal assets are at risk
May be at a disadvantage in raising funds and are often limited to using funds from personal savings or consumer loans
The life of the business ends when the sole proprietor dies

6. Partnership
A business owned by two or more persons who share the risks and the rewards
Apple & MasterCard
Airbnb & Flipboard
BuzzFeed & Best Friends Animal Society
Alexander Wang & H&M
GoPro & Red Bull
CoverGirl & Lucasfilm
Pottery Barn & Sherwin-Williams
UNICEF & Target
Casper & West Elm
Nike & Apple
Bonne Belle & Dr. Pepper
BMW & Louis Vuitton
Uber & Spotify

7. Partnerships Continued

8. Partnership - Advantages
Relatively easy to establish
Time should be invested in developing the partnership agreement
With more than one owner, the ability to raise funds may be increased
The profits from the business flow directly through to the partners’ personal tax returns
The business usually will benefit from partners who have complimentary skills

9. Partnerships - Disadvantages
Partners are jointly and individually liable for the actions of the other partners
Profits must be shared with others
Since decisions are shared, disagreements can occur
The partnership may have a limited life, it may end upon the withdrawal or death of a partner

10. Corporation
A business owned by many people but treated by law as one person
The corporation can own property, pay taxes, make contracts, and be sued just like a person
The owners of a corporation are its shareholders

11. Corporations continued
Shareholders are individuals who have bought stock in the company
Shareholders elect a board of directors to oversee the major policies and decisions
The corporation has a life of its own and does not dissolve when ownership changes

12. Corporations - Advantages
Shareholders (the owners of the corporation) have limited liability for the corporation’s debts or judgments against the corporation
The most they can lose is their investment in the corporation
Shareholders receive a share of the corporation’s profits through dividends
Corporations can raise additional funds through the sale of stock.

13. Corporations - Disadvantages
The process of incorporation requires more time and money than other forms of organization
Corporations are monitored by federal, state, and some local agencies, and as a result may have more paperwork to comply with regulations
Incorporating may result in higher overall taxes
Corporate income is taxed
Dividends are taxed
A business license is a contractual agreement to sell a company’s products or services in a designated geographical area.

14. Corporation Examples The Most Successful Corporations In The U.S.
J.P. Morgan Chase & Co
Walt Disney Company 
Deere and Co
Johnson & Johnson 
Amazon.com

15. Alternative Ways to Do Business
Franchise
Nonprofit Organization
Cooperative

16. Franchise
Contractual agreement to sell a company’s products or services in a designated geographic area
To run a franchise, you have to invest money and pay the franchisor an annual fee or a share of the profits
In return, the franchisor offers a well-known name and a business plan
It provides management training, advertising, and a system of operation

17. Examples of Franchises
Great Clips
McDonald’s
Sonic
Re/Max
Subway
Days Inn
Taco Bell
Jimmy Johns
Dunkin Donuts

18. Franchise - Advantages
Easy to start
You can rely on the proven methods and product of the parent company
The name of the parent company can be a big draw for customers

19. Franchise - Disadvantages
The franchisor is often very strict about how the business is to run
Your business must operate like every other franchise
You might be limited in what products or services you can offer customers

20. Nonprofit Organization
A type of business that focuses on providing a service rather than making a profit
The largest non-profit organization in the United States is the Bill and Melinda Gates Foundation, which has an endowment of approximately $27 billion.

21. Cooperative
An organization owned and operated by its members for the purpose of saving money on the purchase of goods and services
Ocean Spray is a cooperative of cranberry growers

22. Types of Businesses Producers Processors Manufacturers Intermediaries
Service

23. Producer A business that gathers raw products in their natural state
A farmer who grows wheat in Kansas is a producer
Industries that are producers include agriculture, mining, fishing, and forestry

24. Processors Change raw materials into more finished products.
Wheat turned into flour
Crude oil into gasoline
Iron ore into steel
Paper mills and oil refineries are types of businesses that process raw goods.

25. Manufacturers
Businesses that make finished products out of processed goods
A bakery makes bread out of flour
A furniture factory makes tables out of lumber
An automotive plant makes cars out of steel, glass, and plastic

26. Intermediaries
A business that moves goods from one business to another
Wholesaler: buys goods from manufacturers in huge quantities and resells them in smaller quantities to their customers, usually other companies
Retailer: purchases goods from wholesalers and resells them to the consumer, or the final buyer of the goods

27. Service Businesses that provide services rather than goods
Some examples are companies with the following business activity:
financial, insurance, real estate, hotels, restaurants, coffee shops, food courts, hair-dressing and beauty shops

28. Chapter 6 Book Work Fast Review Page 91 1-4 Fast Review Page 93
Using Business Key Words Page 94
1-15
(You only have to write the vocabulary term)