1. Business Ownership
Marketing 1

2. Business Ownership
A characteristic of free enterprise- private ownership
Types of ownership determined through the legal organization of the business
Type of ownership is key decision for entrepreneur
Four forms of business ownership

3. Forms of Business Ownership
Sole Proprietorship
Partnership
Corporation
Limited Liability Company (LLC)

4. Sole Proprietorship Owned and operated by one person
Most common form of business ownership
Approximately 70% of all U.S. businesses are sole proprietorship
Sole Proprietor provides all of the skill, money, and management to run the business
Assumes ALL risk- unlimited liability
Retains ALL profit
Income taxed as personal income

5. Examples of Sole Proprietors
Housekeeping service
Landscape service
Plumber
Electrician
Web site designer/manager
CPA/ Accounting service
Shop/boutique owner
Restaurant owner
Business where ONE person owns and operates the business

6. Partnership
Legal agreement between two or more people for joint responsibility for success or failure of business
Represents about 10% of businesses in U.S.
Formed by partnership agreement- legal document
Specifies responsibilities of each partner
Profit/Loss shared by partners

7. Types of Partnerships
General Partnership
Limited Partnership

8. General Partnership Each partner shares in profits and losses
profit taxed as personal income for each partner
Unlimited liability for company debts

9. Limited partnership
Each partner responsible for debt of company but limited to the amount of investment in the company
Required that there is at least ONE General Partner who has unlimited liability
In exchange for limited risk, limited partners do not have a voice in the management of the company
Withdrawal of a limited partner does not dissolve the company

10. Corporation
Owned by several people but is considered “one person” under the law
Must obtain legal permission by state to operate- process begun with an application to state
Once permission granted this becomes the charter for the corporation
Considered to be a separate legal entity
can borrow money, take out loans, sue, sign contracts, and buy and sell property

11. corporations
Stockholders are owners of company- can sell stock to raise capital for the corporation
Stockholders elect Board of Directors to run the company
Board of Directors make top management decisions affecting the business
Corporations offer owners limited liability (personal affects of owner cannot be taken if company does not meet its financial obligations or is sued)
Corporation is not affected by death, incapacity, or bankruptcy of a stockholder or officer

12. Types of corporations
Private- formed by private persons; broad category; can be “closely held”- which does not sell stock on open market or “publicly held”- which does sell stock
Public- created by federal, state, or local government- can include schools, transit

13. Limited Liability Company (LLC)
Relatively new form
Hybrid of partnership & corporation
Owners (called members) are shielded from personal liability
All profits/losses pass directly to owners without taxation

14. Class Activity Students work individually
Compare and contrast the advantages and disadvantages of each form of business ownership
Chart will be provided by teacher
50 Points