Objective 2 01 TYPES OF BUSINESS OWNERSHIP 1

Objective 2. 01 TYPES OF BUSINESS OWNERSHIP 1

Types of Business Ownership Sole Proprietorship Partnership Corporation Cooperative Franchise Which type of ownership is the most common in the United States? Sole proprietorship – 72% Partnership – 20% Corporation – 5% Other – 3% Which types of ownership counts for the most revenue in the United States? Corporation – 85% Partnership – 8% Sole proprietorship – 5% Other – 2% 2

Sole Proprietorship One person owns a sole proprietorship Owner may manage business, or choose to have someone manage for them, and participate in daily operations and decision-making. 3

Sole Proprietorship Advantages & Disadvantages Advantages for Owner Easy to form Complete control of business Recipient of 100% of the profit One time taxation 4 Disadvantages for Owner Limited capital Unlimited liability Limited lifetime

Sole Proprietorship continued How is a sole proprietorship terminated? Decision or life of owner What are some sources of funding that may be used for investment? Personal, gifts, borrowed, and others may vary What are some local examples? 5

Partnership How many people are considered for a partnership ownership? Association of two or more people to carry on as co-owners of a business for profit. Who manages a partnership? Determined by partnership agreement. It may be one or more partners, or someone that has been hired to manage the day-to-day operations. 6

Partnership Advantages & Disadvantages Advantages for Partners Easy to form More capital and credit Disadvantages for Partners Unlimited liability Limited lifetime – if partner leaves or dies available Work load more evenly Profits are shared Decisions are made jointly shared Losses are also shared Hard to add other partners 7

Partnership continued How is a partnership terminated? Partnerships are terminated by actions of the partners, 8 bankruptcy, death, and/or court order. What are some sources of funding that can be used for investment by partners? Personals of partner(s), gifts, borrowed, and others may vary What are some examples? South Railroad Limited Partnership Eden Limited Partnership (Law and accounting firms are usually good examples for local partnerships. )

Specialized Partnerships Why would an investor choose a limited liability partnership? If an investor does not want to lose more than the amount of their investment and does not care to be involved in every day operations. Why would businesses choose to enter into a joint venture? When the businesses only want to be partners for a limited time and for a specific reason/project. 9

What are some examples? South Railroad Limited Partnership Eden Limited Partnership (Law and accounting firms are usually good examples for local partnerships. ) 10

Types of Partners Type of Partner 11 Participation Relationship Degree of Liability in the Business General* Active to the Public Known Unlimited Dormant Not active Unknown Unlimited Limited Not active Known Limited Secret Active Unknown Unlimited Silent Not active Known Unlimited

Corporation Who owns a corporation? The stockholder (shareholders). An entity with the legal authority to act as a single person. How is ownership determined? Determined by purchase of stock A stockholder, or shareholder, owns a ‘piece’ of the company One share of common stock equals one vote Who manages a corporation? Managers, board of directors, and shareholders 12

Corporation Advantages & Disadvantages Advantages of Corporations Capital easy to obtain Limited liability for shareholders Can invest without having to manage day-to-day operations Possibility of unlimited lifetime of business Decision-making is shared 13 Disadvantages of Corporations Double taxation: profits and earnings Subject to more laws than other types of ownership More difficult to form Operations controlled by shareholders and board of directors instead of original owner(s) Example: 10 years after founding Apple, Steve Jobs was fired by the board of directors.

Corporation continued How is a corporation terminated? Corporation may have unlimited life. Determined by charter or articles of dissolution, and must be approved by the majority of the board of directors and/or stockholders (shareholders) What is the source of investment for corporations? Purchase of stock shares What are some examples? Walmart, Microsoft, Ford Motor Company, Coca. Cola, Delta 14

Specialized Corporations What is special about an S-corporation? This type of corporation treats each partner/owner as an individual by taxing them only one time. Why would a small businesses operate as Limited liability company (LLC)? Used by small businesses to receive limited liability protection. No articles of incorporation or bylaws are needed. . 15

Who benefits from services of nonprofit corporation? Benefits the public and is exempt from taxation. May get grants from the individuals or businesses to raise funds. 16

Cooperatives & Franchises Cooperatives or Co-op Why would an individual or business choose to be part of a cooperative? What are some examples of a cooperative? Franchise Why would an individual choose franchise as a form of business? What are some examples of a franchise? 17