Forms of Business Ownership 1 SOLE PROPRIETORSHIP A
Forms of Business Ownership
1. SOLE PROPRIETORSHIP A one-owner business. The owner is solely responsible for the venture’s operation.
Sole Proprietorship ADVANTAGES: DISADVANTAGES: ● You’re your own boss! ● Need all the skills yourself ● Keep all the profits ● Work hard, long hours ● Control over decisions ● Difficult to raise money for startup ● Unlimited Liability - personal assets are used to cover debts of business
Sole Proprietorship Example e. Bay The e. Bay concept was launched by Pierre Omidyar. This company started as a sole proprietorship and has grown into a large corporation.
Sole Proprietorship Amazon The founder of Amazon, Jeff Bezos started his company as a sole proprietor before it also became a major corporation.
Article: SOLE PROPRIETORSHIP - STILL THE RISKIEST TYPE Of all the types of business organizations that fail and go out of business, individual ownership still ranks the highest. There are several reasons for this. Most individuals lack sufficient money (capital) to invest in the best store equipment and merchandise to sell. Also, privately owned businesses are usually managed entirely by one person. Although that person may be highly skilled, most people do not have the proper business skills such as accounting, salesmanship, marketing, and a knowledge of proper money management that is necessary to survive in a highly competitive and selective marketplace. The greatest risk to sole proprietorship is unlimited liability. In good times, the owner reaps all of the profits. But, in bad times, the owner must bear all of the losses as well. If the business debts become too great, and the suppliers demand payment through the courts, that individual’s personal property such as a house, car, or boat, can all be sold to pay for the debts. Despite the disadvantages, people still continue to operate their own businesses. The freedom of being one’s own boss and the satisfaction derived from watching ideas grow into a success, motivate hundreds of people each year.
Waterloo Region Small Business Centre Check out the. Waterloo Region Small Business Centre and click on YOUTH and click on SUMMER COMPANY. Answer the questions on your worksheet.
2. PARTNERSHIP Two or more people combine their funds and abilities to carry on a business, for profit. • Google founders Sergey Brin & Larry Page EXAMPLES OF FAMOUS PARTNERSHIPS: Visit thiswebsiteand identifybusinessesthat startedout as partnerships.
Partnership Google Larry Page and Sergey Brin met at Stanford Universityin the mid-1990 s and decided they wanted to start a company together. .
Partnership Apple Inc. Apple was founded in 1976. It started as a partnership and has grown into one of today’s largest corporations.
Partnership ADVANTAGES: DISADVANTAGES: ● Share workload ● Share profits ● More ideas ● Conflict between partners ● More money for start-up ● Unlimited Liability personal assets are used to cover debts of business ● Share losses
Partnership Agreement: A written partnership is NOT necessary by law but it will protect both parties in the event of disputes. Items to include: ● Name and location of the business. ● - Terms of the Partnership: Amount invested by each partner Duties of each partner How profits will be split
Famous Partnerships Visit thiswebsiteand list four businesses you didn’t realize started out as a partnership.
3. CORPORATION This is a company that is incorporated (allowed) by the government to carry on a business for profit.
The corporation is owned by shareholders, who buy shares and elect a Board of Directors. Shareholders are allowed 1 vote for each share owned and are liable only to the extent of their investment in the shares. Corporations must form a Charter. This must include: ● Business Name ● Purpose ● Location ● Capital (money invested) ● Number of shares issued ● Names of directors
● In the eyes of the law, a business that is a corporation has a legal existence of its own. It is an “artificial person” with an unlimited life. ● A corporation has the same legal rights as a person—to sign contracts, to purchase or own property, to sue or be sued. ● A corporation is distinct from its shareholders. ● Large businesses become corporations to raise money. This can be used for purchasing land, equipment, inventory, build factories, or hire more employees.
Corporation A legal entitythat exists independently of its owners
Corporation ADVANTAGES: ● Limited Liability shareholders only liable to amount invested in shares ● More capital available ● Professional Management ● Potential for growth DISADVANTAGES: ● High legal costs ● Lots of government “red tape” ● Lack of privacy
Board of Directors: ● Responsible to shareholders ● Determines products or services ● Decides how profits will be used ● Appoints the executive Profits: ● Belong to the shareholders ● Returned to shareholders through a dividend ● Amount of dividend you receive depends on number of shares you own
CROWN CORPORATIONS: ● A Crown Corporation is a business owned and operated by the federal, provincial, or municipal government ● It is organized like any other corporation, except the government owns most or all of the shares. ● The government appoints the Board of Directors and determines corporate goals.
Why have Crown Corporations? 1. They provide essential services to Canadians Examples: Sometimes, these businesses do NOT make a profit. Taxes are used to cover the corporation’s losses. 1. They provide competition with larger private businesses to help regulate some of Canada’s economic conditions. Examples:
Shares and Dividends ABC Company: 100, 000 shares were sold. At the year end, the company made $300, 000 in profit. The Board of Directors had a decision to make. They decided to reinvest $150, 000 back into the corporation and they decided to give $150, 000 back to the shareholders in dividends. Calculate the dividend per share: This means that for every share you own, you get * in dividends.
Jenn has 2, 000 shares in ABC Company. How much will her dividend cheque be for?
4. CO-OPERATIVE ● A co-operative is a business owned by the member or by customers who buys the product / uses service. The motive for operating a cooperative is typically service not profit.
● Members run the co-operatives and each member of a co-operative only gets one vote regardless of the number of shares owned. For example, if Molly has 60 shares in Mountain Equipment Co-op, she gets 1 vote. ● Profits of a co-operative are distributed according to how much the member purchases (distributed as a “patronage refund”).
5. FRANCHISE ● The franchisor licenses the rights to its name, operating procedure, designs, and business expertise to another business (the franchisee). ● The franchisee buys a license to operate a ready-made business and is often provided with a fully operational facility. ● Therefore, the person who owns the Wings Up store on Erbsville Road is the ● What company has the greatest number of franchises worldwide?
Identify and describe five requirements that a franchisee must meet: 1. Pay a franchising fee 2. Invest a minimum amount of capital 3. Follow a procedures manual 4. Help pay for national advertising 5. Purchase equipment/supplies from set spot
Top Franchise Ranking Visit this website https: //www. entrepreneur. com/franchise 500 and identify the 2017 Franchise ranking. Use this information to complete the table on your worksheet:
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