Presentation on theme: "Understand the nature of business."— Presentation transcript:
1Understand the nature of business. 2.01 Understand the types of business ownership.
2Business Ownership Sole Proprietorship Partnership Corporation Franchise
3Sole proprietorship A business owned and run by one person The business is typically managed by the owner.Formation varies by state.
4Advantages Easy to start up Complete control of the business Owner receives all the profitsLimited taxes (one time taxation)
5Disadvantages Limited capital (money) Unlimited liability (responsible for ALL debt)The business is limited to the lifetime of the owner
6PartnershipA business owned and controlled by two or more people who have entered a written agreementThe management of the company depends on the partnership agreement.
7AdvantagesMore capital and credit available than a sole proprietorshipCombined resources (money, expertise)Shared management responsibilitiesShared riskWork load easier to manage than a sole proprietorship
8Disadvantages Profits are shared Responsible for each others decisions Potential for disagreement among partnersUnlimited liability (depending on type)
9Limited Liability Partnership Identifies some investors who cannot lose more than the amount of their investmentInvestors are not allowed to participate in the day-to-day business management
10Types of PartnershipsDormant partner plays no role and is not known to the public.General partner plays an active role and has unlimited liability (every partnership must have at least one general partner).Limited participate as investors and have limited liability.Secret partner plays an active role but is secret from society.Silent partner does not have an active role but is known to the public.
11Participation in the Business Relationship to the Public Types of PartnershipsType of PartnerParticipation in the BusinessRelationship to the PublicDegree of LiabilityDormantNot activeUnknownUnlimitedGeneralActiveKnownLimitedSecretSilent
12CorporationsAn organization owned by one or more shareholders and managed by a board of directors.OwnershipDetermined by purchase of stockA stockholder, or shareholder, owns a ‘piece’ of the companyOne share of common stock equals one vote
13Advantages Easier to obtain capital Limited liability for shareholders Life of the corporation is unlimited
14Disadvantages Double taxation (profits and earnings) Government regulations and legal restrictionsDecision-making shared among managers, board of directors, and shareholders
15Specialized Corporations Subchapter S (S-corporation)treats partners as individuals by taxing them onceLimited Liability CompanyProvides limited liability protection for ownersNonprofit corporationA group of people who join to do some activity that benefits the public
16Types of Corporations Domestic - chartered in a specific state Examples located in North Carolina:Bank of America CorporationLowe’s Home Improvement StoreForeign - chartered in one state, but doing business in another stateAlien - chartered in another nation, but doing business in a state
17Types of Corporations continued Public-established for a governmental purposesExamplesNational Science FoundationExport-Import Bank of the United StatesPrivate-established by individuals for business or charitable purposes.Enterprise Rent-A-CarAmerican Cancer Society
18CooperativesOwned by members, serves their needs, and is managed in their interestPurchase goods and services cheaper as a group than as individualsGreater bargaining power than as individuals
19FranchisePermission to operate a business to sell products and services in a set wayBegins with a parent company who owns the product or service and grants the right to another businessFranchiser: the company that owns the productFranchisee: the company purchasing the right to run the business
20Types of Franchises Business-format Product trade-name Requires franchisee to sell products or service in a specific formatProduct trade-nameAllows franchisee to sell specific products. This format is usually formed by automobile, appliance, and petroleum product