Introduction to Business Chapter 6 Business Ownership Sole

Introduction to Business Chapter 6 Business Ownership

Sole Proprietorship A business owned by only one person

Sole Proprietorship Ownership One person Start-up Costs Very hard to get financing; financing usually comes from owner, family and friends Taxes Owner pays income taxes Liability Unlimited (full responsibility for your company’s debts) Responsibility for Decisions All reside with the owner; all the glory and all the blame goes to the owner

Sole Proprietorship Advantages 1. 2. 3. 4. Easy to start Get to be own boss Keep all profits Taxes are usually low Disadvantages 1. Have to pay for everything 2. Might also lack business skills 3. Unlimited liability

Partnership A business owned by two or more persons who share the risks and rewards

Partnership Ownership Two or more people Start-up Costs All partners can contribute which spreads the costs Taxes Liability Owners pay income taxes Unlimited Responsibility for Decisions Each partner can make decisions for all the partners, whether they agree or not

Partnership Advantages Disadvantages 1. Easy to start 1. Share profit 2. Easier to obtain capital 2. Might not get along 3. Partners might bring with partner different skills 3. Unlimited legal and financial liability

Corporation A business owned by many people but treated by law as one person

Corporation Ownership Start-up Costs Stockholders Financing generally easy to get; also can acquire funds selling stock (shares of ownership) Taxes Liability Responsibility for Decisions Corporation is taxed; owners are also taxed on income Limited (if company loses money, stockholders only lose what they invested) Board of Directors elected by stockholders; officers carry out decisions of the board

Corporation Advantages 1. Limited liability 2. Corporation doesn’t end if owners sell their shares 3. Raise more capital by selling new shares Disadvantages 1. Pay more taxes 2. More difficult to start 3. Running it is more complicated

Franchise A contractual agreement to sell a company’s products or services in a designated geographic area

Franchise Ownership One or more people Advantages 1. 2. Easy to start Established name Disadvantages 1. 2. Must operate as franchisor wants Limited in what products or services you can offer

Nonprofit Organization A type of business that focuses on providing a service rather than making a profit

Nonprofit Organization Ownership One or more people Advantages 1. Doesn’t have to pay taxes Disadvantages 1. 2. No profit Run by a board of directors

Cooperative An organization owned and operated by its members for the purpose of saving money on the purchase of certain goods and services

Cooperative Ownership Group of 1. people with 2. same interest 3. Advantages Pool resources Save money as a group Pay less in taxes than regular corporations Disadvantages 1. Decisions are made as a group