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Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE1 Forms of Business Ownership Goals Understand the three major forms of business ownership. Determine when each form of business ownership is most appropriate. Recognize other specialized business ownership forms. 5-2
Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE Chapter 5 2 BUSINESS OWNERSHIP Proprietorship Partnership Corporation
Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE Sole Proprietorship Sole Proprietorship: one owner Advantages: easy to create/dissolve; inexpensive to create; business pays no taxes; least regulated Disadvantages: unlimited liability; limited to the owner’s abilities and skills
Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE Partnership More than one person own a business and share the assets, liabilities, and profits. General vs Limited Partnership General: all have unlimited liability and responsibility Limited: limited to partners investments Joint Venture: partnership two companies joint to complete a specific projects; set period of time; dissolves after completion of project/time
Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE Partnership (Continued) Advantages: inexpensive to create; partners have control; more capital (money); more ideas/creativity Disadvantages: difficult to dissolve one partner’s interest; personality conflicts; bound by laws of agency (liable for each other’s actions)
Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE Corporation A business chartered (registered) by a state Advantages: raise capital by selling stock limited liability create pensions and retirement for employees Disadvantages: expensive to set up income heavily taxes
Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE Types of Corporations C-Corporation (most common; taxed on profits and when distributed to shareholders) Subchapter S Corporatin (no double taxation) Nonprofit Corporation (legal entities that make money for reasons other than the owners’ profit) Limited Liability Corporation (limited personal liability; taxed only once)
Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE Chapter 5 8 Forms of Ownership Source: Internal Revenue Service
Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE Chapter 5 9 CHOOSING A FORM OF BUSINESS OWNERSHIP Choosing a proprietorship Choosing a partnership Choosing a corporation
Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE Chapter 5 10 OTHER FORMS OF OWNERSHIP Specialized partnerships and corporations limited liability partnership joint venture Cooperatives and franchises S-corporation limited liability companies (LLC) nonprofit corporations.
Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE Chapter 5 11
Read to Learn Describe the advantages and disadvantages of the three major forms of business organizations. Describe how cooperatives and nonprofits are.
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Business is owned and run by one individual Nearly 76% of all businesses Owner receives all of its profits and bear all of its losses.
Types of Business Ownership 1 Discuss the sole proprietorship legal form. Explain the partnership legal form. Explain how the corporate form gives owners.
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