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Chapter 6: Business Ownership and Operations

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1 Chapter 6: Business Ownership and Operations
Introduction to Business Unit II: Business Ownership and Environments

2 Types of Business Ownership
Sole Proprietorship Partnership Corporation

3 Sole Proprietorship A business owned by only one person Advantages
Easy to start (license or permit) Be your own boss Keep all profits Disadvantages Pay for everything yourself Requires business skills Unlimited liability (full responsibility for company’s debts)

4 Partnership A business owned by two or more persons who share risks and rewards Partnership agreement outlines rights and responsibilities of each partner How much money each partner will invest How you will share the profits How you will share the work How you will end the partnership

5 Partnership continued
Advantages Easy to start (may only need a license) Pay taxes only on personal profit Easier to obtain capital Wider variety of skills Disadvantages Share profits Might not get along Share unlimited legal and financial liability with partners

6 Corporation A business owned by many people, but treated by the law as one person Can own property, pay taxes, make contracts, and be sued Exists separate from owners Forming a corporation requires a charter (license) from the state Funding a corporation requires Selling stock (shares of ownership) Forming a board of directors (hires senior officers)

7 Corporation continued
Advantages Limited liability (stockholders lose only what they invest) Doesn’t end when owners sell shares Raise more capital by selling new shares Disadvantages Pay more taxes Federal and state governments tax corporate profits Owners taxed on income from corporation Close government regulation More difficult to start and more complicated to run

8 Business Ownership / Parenthood
Sole Proprietorship Single-parenthood Partnership Parenting with a spouse Corporation Child (business) becomes an adult

9 Questions for Discussion
Why might two or more people decide to form a partnership instead of each forming a sole proprietorship? Working as a team member is similar to being in a partnership. What are some advantages and disadvantages of working with others? (Consider your own experiences in school.) There are more sole proprietorships than partnerships or corporations in the United States. Why do you think so many businesses are organized as sole proprietorships?

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