1. Business Structures
Chapter 6

2. Warm-UP Think about the four types of businesses
Extractors, Manufacturers, Marketers, Service Businesses
If you were to start your own business, which type of business would it be?
Come up with a name
Write two or three sentences describing your business
Where would you put this business?
What other information do you need or concerns do you have about running this business?

3. Types of Business Ownership
There are 3 major types of business ownership.
Sole Proprietorship
Partnership
Corporation

4. Sole Proprietorship A business owned by one person
Small stores – jewelry, restaurants, gas stations, hair salons
2/3rds of U.S. businesses are sole proprietorships
Sole proprietor has complete control of all business decision
But assumes ALL risk as well (unlimited liability)

5. Partnership
A business owned and managed by a small group (usually two or three people) by written agreement
Owners share in profits AND share in all debts (unlimited liability)

6. Corporation
A business operated by multiple people, and with written permission (after filing for certificate of incorporation) from the state.
The corporation becomes its “own person” which “acts on behalf of the owners”
It is a legal entity existing separately from its owners

7. Read the story of creating a business

8. Get into three groups
Group 1 – Sole Proprietorship
Group 2 – Partnership
Group 3 – Corporation
Your group will come up with at least three advantages and three disadvantages for your type of ownership
Share with class

9. Sole Proprietorship Advantages Disadvantages Easy to start business
Owner makes all the decisions and is own boss
Owner receives all of the profits
Disadvantages
Capital is limited to what the owner can supply or borrow
Owner is liable for all debts, even losing personal property if business fails (unlimited liability)
Long hours and hard work often necessary
Life of the business depends upon owner; it ends of owner quits or dies

10. Partnership Advantages Disadvantages Fairly easy to start the business
More sources of capital available
More business skills available
Disadvantages
Each partner is liable for business debts made by ALL partners, even to losing personal property if business fails
Each partner can make decisions; more than one boss
Partnership ends of partner quits or dies
Each partner shares the profit

11. Corporation Advantages Disadvantages
More sources of capital available (stock)
Specialized managerial skills available
Owners liable only up to the amount of their investment
Ownership can be easily transferred through sale of stock; business is not affected by change of ownership
Disadvantages
Difficult to start (Certificate of Incorporation)
Owners do not have control of day to day decisisons (unless they are officers of company – CEO, president etc.)
Double Taxation

12. Within the hierarchy of a business, there are different levels of careers
Entry Level
Career Sustaining
Specialist
Supervisor
Manager/Entrepreneur

13. Entry Level Standard or routine activities
Limited or no need for decision-making skills
Little - No previous education or experience necessary
Requirements:
Good personal appearance
Appropriate business behavior
Basic math and communication skills
DANCE MOVES?
Examples:
Cashier
Bagger
Counterperson
Clerk
Driver
Attendant

14. Career Sustaining Level
More complex duties
Routine decision-making skills
Limited control of one’s own working environment
Empowerment
Examples:
Sales person
Reservationist
waiter/waitress
Stockperson

15. Specialist Frequent use of decision-making and leadership skills
Requirements:
Mastery of skills across functions or extensive knowledge of ones functions
Thorough understanding of the concepts and functions related to ones position
Examples:
Professional salesperson, copywriter, buyer, mfg. rep.

16. Supervisor
High level of competence in decision-making and leadership skills
Responsible for planning, coordinating, and supervising people activities
Examples:
Department manager
Supervisor
Shift manager
Sales manager

17. Manager/Entrepreneur
Competence in a variety of tasks related to owning one’s own business or managing a department within an organization
Responsible for success or failure of a unit within an organization or of entire business
Examples:
Merchandise manager
Marketing manager
Store manager
Owner

18. Organizational Chart

19. Board of Ed

20. Franchising
A continuing relationship in which a franchisor provides the rights to the franchisee to operate or sell a product (to run a franchise).

21. Franchise
A franchise is a written contract granting permission to sell someone else’s product or service in a prescribed manner, over a certain amount of time, and in a specified territory.
Can be operated as a proprietorship, partnership, or corporation

22. Franchise Franchisee Franchisor Franchise agreement states the
Individual or business granted rights to operate the business
Franchisor
Parent company granting the rights to franchisee
Franchise agreement states the
Duties and rights of both parties
Name and products/services offered
Design and color of the building
Price of products/services
uniforms

23. Franchise Relatively easy to start up
Franchisor agrees to help franchisee get started
National advertising by franchisor
Franchisor collects percentage of sales or agreed upon fee each year
Usually require large start up capital
$250,000
$500,000
$750,000

24. Cooperatives
Cooperatives are owned by the members it serves and is managed in their interests
Similar to corporations
Formation approved by state
Owners may own share of stock
Board of directors
US co-ops

25. Cooperatives
Difference between co-op and corporation is in how it is controlled
Each member gets one vote (no matter how many “shares” each member owns) or
Profits are refunded to owners or put back into business for expansion

26. Non-Profit Corporations
Any corporation that provides a service but not for profit
Owners do not collect payment from “profits”
Profits are put back into the corporation
Ex.
Some colleges, American Red Cross, Boy Scouts of America, Future Business Leaders of America, DECA

27. Limited Liability Corporation
LLC
Provides the limited liability features of a corporation and the tax benefits and flexibility of a proprietorship or partnership
Members are protected from personal liability for business decisions 
not taxed as a separate business entity 
Profits and losses are shared by each member of LLC
Members report profits and losses on their personal federal tax returns, (just like the owners of a proprietorship or partnership would)