2 1 Types of Business Ownership Types of

2. 1: Types of Business Ownership

Types of Business Ownership Forms of business ownership and types of businesses help describe how businesses are organized and run There are four main types of business ownership Sole proprietorship, partnership, corporations, co- operatives Franchises are described as hybrid

Sole Proprietorship Features One owner (referred to as the proprietor)

Sole Proprietorship ADVANTAGES Be your own boss Easy to start and end (don’t have to register with govt; can declare your business on personal income tax) Profit to the owner DISADVANTAGES Unlimited liability (owner responsible for all the losses including their home or other personal losses) Financing may be difficult Owner may not be familiar with all aspects of business

Partnership Features Two or more owners who agree to share costs & responsibility Written partnership agreement General and Limited are two main types Law firms, A&W, M&M’s, Black & Decker

Partnership ADVANTAGES More capital and financing available Shared responsibilities (one is the accounting expert, the other is marketing expert) DISADVANTAGES Unlimited liability in general partnerships (means that each partner could be responsible for the other partner’s businessrelated debt) Partner disagreements

Corporation Features Can be small or multinational Public/Private/Crown/Municipal Ownership takes the form of shareholders One vote per share (more shares you own, greater control who have) Board of directors…found in large corporations due to multiple number of owners

Corporation ADVANTAGES Limited liability (shareholders cannot be held responsible for debts of the corporation…only lose what you have invested) Transfer of ownership is simple DISADVANTAGES Timely & costly to start up People who own a few shares don’t have a lot of influence on how the company is run

Co-operative Features Owned by members with each member has only one vote regardless of number of shares Board of directors

Co-operative ADVANTAGES Less expensive goods/services Easily set up DISADVANTAGES Decision making could be difficult

Franchise Features One business (franchiser) licenses the rights to its name, operating procedure, designs, & business expertise to another business (franchisee) Hybrid type of ownership

Franchise ADVANTAGES Brand recognition appeals to consumers Shared marketing DISADVANTAGES Franchise fee (can range from thousands to millions of $$$$$) Monthly fee (ie, 5% of total monthly sales, also pay for advertising maybe 1% / month) Requirement to buy from franchiser Corporate training and support

Textbook Questions Turn to page 50 and complete questions #1 #2 #5 #7 #9 Please write out each question for study purposes

Mike, Carol, and Devon want to start a company that sells light bulbs. The three have agreed that the best way to fund their new venture is to allow individuals to invest in their company and receive percentages of the profit. The three entrepreneurs also want to be considered separate from the business; any liabilities the business may incur should not impact their own finances directly. Which type of business ownership would suit them best?

Brad has been mowing grass for people since he was 16. Recently, Brad has decided that he would like to become a little more official, but without a lot of hassle. Brad wants to rent out a building and create an office to bring his business, Grass Cutters, more public. He would prefer to record company income as his personal income to keep things separate. Also, the less legal issues he has to deal with in setting up his company, the better. Which type of ownerships is a better fit for Brad?

Lisa, Riley, and Amanda want to create a tea party company. Porcelain Parties, as they have decided to call the company, is going to be run by the three ladies. They have agreed that they will personally divide profits, debts, and duties amongst the three of them evenly. Since they are in a hurry to get the business up and running, a simple approach is desired. The three have each invested the funds to start the business. Which type of ownership do you suggest to these ladies?

Bob and Frank have a genius business idea: they want to market and sell computer accessories specifically for college students. The two already spoke to several of their business colleagues and other investors who have all agreed to invest in the company, as long as they received updates on the company's financial standings and can buy, sell, or trade their investment piece should they desire to do so. Although Bob and Frank are quite confident in the success of their new company, for legal issues, they would like to be considered separate from the business. Which type of ownership would you recommend?

Return on Investment http: //www. investopedia. com/video/play/ret urn-on-investment-basics/#axzz 2 C 4 Ak. Jv. G 9