2. After completing this chapter you will be able to: 1.Name business ownerships 2. Compare the ownerships 3. Describe alternative ways to do business 4. Identify types of business

3. You need to understand business ownerships and operations before starting a business.

4. Sole Proprietorship- a business owner by one person Unlimited Liability- full responsibility for a company’s debts Partnership- business owned by two or more people Corporation- business owned by many people but treated by law as one person Stock- shares of ownership in a corporation Limited Liability- stockholders only lose what they invested Franchise- a contractual agreement to sell a company’s products and/or services in a designated geographic area

5. Nonprofit Organization- a business that focuses on providing a service rather than making profit Cooperative- organization owned and operated to save money on the purchase on goods and/or services Producer- business that gathers raw products in their natural state Processors- change raw materials into more finished goods Intermediary- business that moves goods from one business to another Wholesaler- aka a distributor, distributes goods Retailer- purchases goods from a wholesaler and sells them to the customer

6. A sole proprietorship is a business owned by only one person. Advantages of a sole proprietorship include: 1. easy to start 2. be your own boss 3. keep all profit Disadvantages are: 1. pay for all expenses 2. lack of business skills 3. unlimited liability *The greatest disadvantage is unlimited liability.

7. A partnership is a business owned by two or more people. To start a partnership you need to draw up a partnership agreement. Advantages of a partnership are: 1. easy to start 2. easy to obtain capital 3. partners bring different skills to the business Disadvantages are: 1. you share risks and profits with your partner 2. partner can leave partnership and business is ruined 3. you share unlimited legal and financial responsibility

8. A corporation is a business owned by many people but treated by law as one. To form a corporation you need a corporate charter. A corporation sells stock (shares of owner ship) to raise money. A major advantage is limited liability. A disadvantage is that you often pay more taxes.

9. A franchise is a contractual agreement to sell a company’s products or services. To run a franchise you have to invest money and pay the franchisor an annual fee. An advantage of a franchise is that it is easy to start. A disadvantage is that the franchisor is often very strict on how the business is run. *If you want to start a business but lack the business know-how, you will want to choose a franchise

10. A nonprofit organization is a business that focuses in providing a service rather than making profit. It has to register with the government and might be run by a board of directors. It doesn’t have to pay taxes. Instead of investors, nonprofit organizations rely on government grants and donations.

11. A cooperative is an organization that is owned and operated by its members for the purpose of saving money on the purchase of certain goods and services. You need a government charter to start one. It can sell stock and have a board of directors. They pay less in taxes *Examples of cooperatives are Ace Hardware and Welch’s