1. Coach Johnson / Lisa Head
Forms of Ownership

2. 3 Types of Ownership Sole Proprietorship Partnership Corporation
C-Corporation
Subchapter S Corporation
Limited Liability Company (LLC)

3. Sole Proprietorship Overview
Owned and Controlled by one person
Oldest, simplest, most common
76% Business in United States
Examples include:
lawyers, plumbers, carpenters, hairstylists, florists, and farmers
Advantages? Disadvantages?
Owner takes all profits.
There are no overhead expenses required in the establishment.
It allows for quick and free decision-making.
Because there are a limited number of assets to give as security, it is difficult to obtain a loan.
It is not easy to acquire good, qualified staff, as there is little to offer them in the way of promotion.
Salaries paid to workers are normally lower than the salaries that bigger companies can offer.

4. Sole Proprietorship Advantages:
Easy start up
Small Capital and few legal consideration
Zoning and Licenses may be required
Not difficult to obtain
Control
Take opportunities, react to troubles
Personal satisfaction

5. Sole Proprietorship Advantages:
Profits
Stay in house
Major decision in choosing this type
Taxation
Individual not business

6. Sole Proprietorship Disadvantages:
Unlimited Liability
Personally responsible for all good and bad
Liability Protection?? How much would you need
Sole Responsibility
All aspects of running business
Time, energy, decision making

7. Sole Proprietorship Disadvantages:
Limited Growth Potential
Small loan or Savings
Difficulty getting loan
Collateral
House
Car
More Capital = Expansion

8. Sole Proprietorship Disadvantages:
Longevity
Firm/Business life
Depends on owns:
Health
Hard Work
Time
Effort

9. Sole Proprietor Activity
Name three challenges facing a sole proprietorship
Name two legal considerations
Name 2 main advantages for being a sole proprietor

10. Partnerships Owned and Controlled by two or more people
Advantages? Disadvantages?
Examples include:
Doctors, lawyers, accountants, and construction companies

11. Partnerships Overview
General partnerships
Enjoy equal decision-making authority
Each has unlimited liability
Limited Partnership
Provide financial capital in exchange for a share of the profits
Rarely take an active role in business decisions
Liability is limited for some partners

12. Advantages of Partnerships
Easy start up
Low costs and few government regulations
Partnership contracts
Outline responsibilities of each
Includes conditions for adding/dropping partners, and dissolving the partnership

13. Advantages of Partnerships
Specialization
Each can have different duties
Helps realize specific talents
Pizza Business Example
Shared Decision Making & Loss
Minimize the chance of mistakes
Secure capital easier than sole
Take hit = keep going

14. Partnership Disadvantages
Unlimited Liability
Can lose more than you invest
Still not a large number of owners, much risk
Conflict
Difference of opinions
Lower morale
Delay decisions
Affect overall efficiency

15. Partnership Disadvantages
Lack of longevity
Willingness and Ability of teamwork
Illness
Death
Conflict

16. Corporations
A corporation – group of owners (stockholders) share profits (and losses)
Corporations can
own property
hire workers
make contracts
pay taxes
sue and be sued
make and sell products

17. Share Holder Stock Holder / Share Holder Owners of the corporation
Smaller Companies – Owners Majority
Policy Makers

18. Corporate Advantages Benefits for Stockholders
Limited liability (only as much as they invest)
Can sell ownership at any time
Benefits for Corporations
Founders have limited liability
Separation of ownership from management
Easy to raise capital
Longevity

19. Corporate Disadvantages
Corporate Issues
Corporate charters
expensive and difficult to obtain
Federal and state governments regulate corporations
Slow decision-making process (idea, discuss, present, vote, act)

20. Corporate Disadvantages
Stockholder Issues
Earn profit without actually working for the company
Lack of control
Shared Issues
Corporate profits are TAXED TWICE!!
Corporate income
Dividend income

21. C-Corporation Pays taxes on Earnings Shareholders Pay taxes
Protection for the owners
Certificate of Incorporation

22. Subchapter S Corporation
Taxed like a partnership
Lower Tax rate
No more than 75 stock holders
Must be US citizens
Only one class of stock
Restaurant – Most common

23. Nonprofit Corporation
Legal entity
Operates to generate revenue for other purposes other than the owner’s
Can make no profit

24. Limited Liability Company (LLC)
Limited Liability – Owners
Tax Benefits
Simpler to create
Flexibility of a partnership structure
Protects Owners
No Double Taxation
No limitations on the number of members or their status