Forms of Business Ownership Forms of Business Ownership

Forms of Business Ownership

Forms of Business Ownership 1. Sole Proprietorship owned by one person 2. Partnership Usually owned by two or more partners 3. Cooperative Owned by its workers or by members who buy from the business 4. Franchise One business licenses (allows) another to use its name, operating procedure, etc. Can have any form of ownership 5. Corporation Business is an artificial “person” created by law and owned by shareholders

Sole Proprietorships Partnerhships Cooperatives

Sole Proprietorship Simplest form of business ownership One owner of a business

Sole Proprietorship (over 1 million in Canada) Advantages J Keep all the profits J Make all the decisions J You are your own boss J (i. e Financial information can be kept secret. from competitors), but not the government Disadvantages L Unlimited Liability L Facing personal and financial risks and challenges on your own L Borrowing money may be more difficult L Huge time commitment

Sole Proprietors Examples may include individuals who are: Artists Authors Carpenters Computer specialists Digital designers Ecotourism guides Farmers Industrial designers Photographers Web designers Chefs or Bakers Hair stylists

Partnership More complex and needs a written agreement Partners must discuss and agree on issues such as: þ how much time and money each partner will put into the business þ How the profits will be shared þ Who will make decisions about different aspects of the business þ Who will manage the employees þ How the partnership might be ended

Partnership Agreement All partners must sign the partnership agreement which includes: þ the name and location of the business þ Its purpose þ The amount of partner’s investment þ The way that the profits and losses are to be divided þ The duties and responsibilities of each partner þ The procedures for ending the partnership

Partnerships Advantages Disadvantages J Inexpensive to set up and L Unlimited liability organize ($1000) L Your personal assets J Two people to invest and (home, care etc may it is easier to borrow from need to be used to pay a bank off business debts) J More brains filled with different knowledge, L Conflicts between experience, skills partners that can not be J Shared responsibility worked out eases stress and workload J Share debt and can more easily take a vacation

Typical Partnerships Small independent service or retail businesses. bakeries, hair salons, flower shop, convenience store, landscaping or décor store, consignment shop, restaurants, retail stores, plumbers, electricians, mechanics, carpenters Professional Designations or Apprenticeships accountants, lawyers, doctors, veterinarians, mechanics, plumbers, electricians, carpenters

Co-operatives Also called Co-ops Business owned and operated by a group of people with a strong common interest Start-up costs are shared among members Members own and control and make all the business decisions

Examples of Coops Farmers Belong to producer co-ops Members bring crops to a central location to sell them Coop monitors the supply of the crop and controls its sale and price Farmers do not compete against each other or undercut other’s prices Farmers can combine to buy equipment and reduce costs and share expertise Example: Saskatchewan Wheat Pool sells products all over the world.

Consumer Co-ops Join together to operate a business that provides them with goods and services Profits are divided among the members in proportion to the amount of business that each member does Examples: Omish Community Furniture Co-ops

Credit Unions/ Caisses Populaires Financial co-ops Like banks but profits are distributed annually to their members

Co-operatives Advantages J Shared skills and experiences J Less risk than for sole proprietor and partnership J Liability is limited to the amount of your share in the capital of the coop J Each member gets one vote – equal decision making and influence J If you have more shares, you still get one vote, but more share of the profits J Coops get discounts due to volume purchasing by many people J Control sale and price of goods Disadvantages L Individual members hesitant to invest more – only one vote L Decision-making can be difficult because of multiple members L Commitment of members may vary because some have more money at stake and some may take things more seriously than others