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Understand the nature of business.

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Presentation on theme: "Understand the nature of business."— Presentation transcript:

1 Understand the nature of business.
2.01 Understand the types of business ownership.

2 Business Ownership Sole Proprietorship Partnership Corporation

3 Sole proprietorship A business owned and run by one person
The business is typically managed by the owner. Formation varies by state.

4 Advantages Easy to start up Complete control of the business
Owner receives all the profits Limited taxes (one time taxation)

5 Disadvantages Limited capital (money)
Unlimited liability (responsible for ALL debt) The business is limited to the lifetime of the owner

6 Partnership A business owned and controlled by two or more people who have entered a written agreement The management of the company depends on the partnership agreement.

7 Advantages More capital and credit available than a sole proprietorship Combined resources (money, expertise) Shared management responsibilities Shared risk Work load easier to manage than a sole proprietorship

8 Disadvantages Profits are shared Responsible for each others decisions
Potential for disagreement among partners Unlimited liability (depending on type)

9 Limited Liability Partnership
Identifies some investors who cannot lose more than the amount of their investment Investors are not allowed to participate in the day-to-day business management

10 Types of Partnerships Dormant 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.

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

12 Corporations An organization owned by one or more shareholders and managed by a board of directors. Ownership Determined by purchase of stock A stockholder, or shareholder, owns a ‘piece’ of the company One share of common stock equals one vote

13 Advantages Easier to obtain capital Limited liability for shareholders
Life of the corporation is unlimited

14 Disadvantages Double taxation (profits and earnings)
Government regulations and legal restrictions Decision-making shared among managers, board of directors, and shareholders

15 Specialized Corporations
Subchapter S (S-corporation) treats partners as individuals by taxing them once Limited Liability Company Provides limited liability protection for owners Nonprofit corporation A group of people who join to do some activity that benefits the public

16 Types of Corporations Domestic - chartered in a specific state
Examples located in North Carolina: Bank of America Corporation Lowe’s Home Improvement Store Foreign - chartered in one state, but doing business in another state Alien - chartered in another nation, but doing business in a state

17 Types of Corporations continued
Public-established for a governmental purposes Examples National Science Foundation Export-Import Bank of the United States Private-established by individuals for business or charitable purposes. Enterprise Rent-A-Car American Cancer Society

18 Cooperatives Owned by members, serves their needs, and is managed in their interest Purchase goods and services cheaper as a group than as individuals Greater bargaining power than as individuals

19 Franchise Permission to operate a business to sell products and services in a set way Begins with a parent company who owns the product or service and grants the right to another business Franchiser: the company that owns the product Franchisee: the company purchasing the right to run the business

20 Types of Franchises Business-format Product trade-name
Requires franchisee to sell products or service in a specific format Product trade-name Allows franchisee to sell specific products. This format is usually formed by automobile, appliance, and petroleum product

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