Chapter 6 Business Ownership and Operations 6 1

Chapter 6 Business Ownership and Operations 6. 1 Types of Business Ownership

Organizing a Business n 3 main types of business ownership ¨ ¨ ¨ n n Sole Proprietorship Partnership Corporation Entrepreneurs must decide which type best fits their situation. During the life of a business, the form can change. What percentage of businesses in the U. S. are: ¨ Sole Proprietorships n ¨ Partnerships n ¨ 5% Corporations n ¨ 72% 20% Other n 3%

Sole Proprietorship n n Sole Proprietorship: a business owned by one person Some Advantages: ¨ Easy to start ¨ In charge of their own business n Some Disadvantages ¨ Unlimited Liability: the owner is responsible for the business’ debt. ¨ Limited access to credit

Partnership n n Partnership: a business owned by two or more people who share its risk and rewards. Some Advantages: ¨ Easy to start ¨ Easier to get financing than sole proprietorship n Some Disadvantages ¨ All partners share the risk ¨ Partner disputes on how to run the business

Corporations n n Corporations: a company that is registered by the state and operates apart from its owners. Some Advantages: ¨ Limited Liability: holds a firm’s owners responsible for no more than the capital that they have invested in it. ¨ Easy to raise money by selling stocks. n Some Disadvantages: ¨ Pay taxes on income and stockholders pay taxes on profits issued to them ¨ Government regulation

Other Ways to Organize a Business n n Cooperative: an organization that is owned and operated by its members. Nonprofit Organization: a type of organization that focuses on providing a service, but do not make a profit. ¨ n Since they do not make a profit, they do not pay taxes. Franchise: a contractual agreement to use the name and sell the products or services of a company in a designated geographic area.

Homework Ch. 6 Definitions-Packet n Review the questions on pg 98, 1 -3 n Complete the Reading Activity and Graphic Organizer for 6. 1 n