Chapter 6 BUSINESS OWNERSHIP AND OPERATIONS
ORGANIZING A BUSINESS TYPES OF BUSINESS OWNERSHIP Sole In Proprietorship USA 3/4 businesses have no employees California led solo proprietorship, closely followed by fishing states Alaska and Maine Income is taxed only once Need a license or permit Unlimited Liability or full responsibility for your company’s debts. You could lose your personal property
ORGANIZING A BUSINESS TYPES OF BUSINESS OWNERSHIP Partnership- owned by two or more people who share the risks and rewards May need a permit or license Easier to obtain capital Partners bring different skills Income is taxed only once Draw up a partnership agreement that outlines the rights and responsibilities of each partner
ORGANIZING A BUSINESS TYPES OF BUSINESS OWNERSHIP Corporation – owned by many people but treated by law as one person. Exits separate from its owners. Need corporate charter (a license to run a corporation) from your State Sell STOCK to raise money – for each share of common stock the stockholder gets a share of the profits and a vote Need a Board of Directors who control the corp. Major advantage is LIMITED LIABILITY. If the corporation loses money shareholders only lose the money they invested.
ALTERNATIVE WAYS TO DO BUSINESS Franchise – a contractual agreement to sell a company’s products or services in a geographic area. Invest money Pay an annual fee or share of profits You get a well known name and business plan It’s easy to start Disadvantage the company is very
ALTERNATIVE WAYS TO DO BUSINESS Nonprofit Organization – type of business that focuses on providing a service rather than making a profit Registers with the government just like a corporation and might be run by a Board of Directors It doesn’t have to pay taxes Rely on donations and grants instead of investors
ALTERNATIVE WAYS TO DO BUSINESS Cooperative – an organization owned and operated by its members for the purpose of saving money on the purchase of certain goods and services. Its like a corporation sell stock and choose a Board of Directors to run it Need government charter to start one Individual owners pool their resources to buy insurance, supplies, advertising….
TYPES OF BUSINESSES Producers – a business gathers raw products in their natural state…. the raw materials …. agriculture, mining, fishing and forestry. Processors – change raw materials into more finished products. Wheat is turned into flour Crude oil into gasoline
TYPES OF BUSINESSES Manufacturers – businesses that make finished products out of processed goods. They turn raw or processed goods into finished goods that require no further processing and that are ready for the market Bakeries make bread out of flour Auto plant makes cars out of steel Many of the leading businesses in USA are manufacturers: Pepsi, General Electric, Procter&Gamble, Boeing….
TYPES OF BUSINESSES Intermediaries -a business that moves goods from one business to another It buys them, stores them and the resells them. Wholesaler Retailer
INTERMEDIARIES Wholesaler –also known as a distributor who buys product is large quantities and then resells it in smaller quantities Retailer – buys product from wholesaler then sells them to the consumer or the final buyer.
TYPES OF BUSINESSES Service Businesses – provide services rather than goods. Services are the products of a skill or an activity Some services meet needs (doctors) some conveniences (taxi, realtor, chef, hairdresser……) Service Industry employees ¾ of the workforce