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Corporations Glencoe Entrepreneurship: Building a Business SECTION 7.2 Chapter 7 Types of Business Ownership Learning Goals 1. I will be able to identify the five different forms of businesses. (e.g. sole proprietor) 2. I will be able to compare the five different forms of businesses 3. I will be able to evaluate the five different forms of businesses.

Corporations Glencoe Entrepreneurship: Building a Business SECTION 7.2 Chapter 7 Types of Business Ownership Entrepreneurs need to understand the advantages and disadvantages of various types of businesses so that they can choose the one that best suits their needs. The Main Idea

Corporations Glencoe Entrepreneurship: Building a Business SECTION 7.2 Chapter 7 Types of Business Ownership Sole Proprietorship The easiest and most popular form of business ownership is the sole proprietorship. sole proprietorship a business that is owned and operated by one person

Corporations Glencoe Entrepreneurship: Building a Business SECTION 7.2 Chapter 7 Types of Business Ownership The owner of a sole proprietorship: receives the profits, incurs any losses, and is liable for the debts of the business. Sole Proprietorship

Corporations Glencoe Entrepreneurship: Building a Business SECTION 7.2 Chapter 7 Types of Business Ownership Sole Proprietorship In a sole proprietorship the owner must decide how much liability protection he or she needs. liability protection insurance against the debts and actions of a business

Sole Proprietorship 7 Advantages Sole proprietorship is easy and inexpensive to create. The owner has complete authority over all business activities. It is the least regulated form of business ownership. The business pays no taxes; income is taxed at the personal rate of the owner.

Sole Proprietorship 8 Disadvantages The owner has unlimited liability. Raising capital is more difficult. The business is totally reliant on the skills and abilities of the owner. The death of owner dissolves the business unless there is a will to the contrary.

Corporations Glencoe Entrepreneurship: Building a Business SECTION 7.2 Chapter 7 Types of Business Ownership Disadvantages The biggest disadvantage of a sole proprietorship is financial. In this form of business ownership, the owner has unlimited liability. unlimited liability full responsibility for all debts and actions of a business

Corporations Glencoe Entrepreneurship: Building a Business SECTION 7.2 Chapter 7 Types of Business Ownership Partnerships A partnership draws on the skills, knowledge, and financial resources of more than one person. partnership an unincorporated business with two or more owners who share the decisions, assets, liabilities, and profits

Partnerships 11 Advantages Partnerships are inexpensive to create. Partners can share ideas. Partners can secure investment capital more easily and in greater amounts.

Partnerships 12 Disadvantages It is difficult to dissolve one partner’s interest without dissolving the partnership. There may be personality conflicts. Partners can be held liable for each others’ actions.

Corporations Glencoe Entrepreneurship: Building a Business SECTION 7.2 Chapter 7 Types of Business Ownership In a corporation, the owners of the business are protected from liability for the actions of the company. The Main Idea

Corporations Glencoe Entrepreneurship: Building a Business SECTION 7.2 Chapter 7 Types of Business Ownership What Is a Corporation? corporation a business that is registered by a state and operates apart from its owners; it issues shares of stock and lives on after the owners have sold their interest or passed away

Corporation 15 Advantages limited liability ability to raise investment money perpetual existence employee benefits tax advantages

Corporations Glencoe Entrepreneurship: Building a Business SECTION 7.2 Chapter 7 Types of Business Ownership Advantages Corporate shareholders have limited liability, but some banks require officers to personally guarantee the debts of the company. limited liability partial responsibility of a corporate shareholder; he or she is responsible only up to the amount of his or her individual investment

Corporation 17 Disadvantages expensive to set up income more heavily taxed subject to double taxation on income pays taxes on profits stockholders taxed on dividends

Corporations Glencoe Entrepreneurship: Building a Business SECTION 7.2 Chapter 7 Types of Business Ownership Comparisons between Sole Proprietorship, Corporations and Partnership

Corporations Glencoe Entrepreneurship: Building a Business SECTION 7.2 Chapter 7 Types of Business Ownership LIABILITY Sole Proprietorship General Partnership Corporation Sole Proprietor Personally Liable for All Debts and Obligations Partners are Jointly and Severally Liable for all Partnership Obligations  Shareholder’s Liability limited to Extent of Capital Contribution [Limited Liability]

Corporations Glencoe Entrepreneurship: Building a Business SECTION 7.2 Chapter 7 Types of Business Ownership TAXATION Sole Proprietorship General Partnership Corporation Not a Taxable Entity; Income (Loss) passes through to Sole Proprietor Partnership not a Taxable Entity; Allocations of Income and Loss allowed within Partnership before Pass-Through  Corporation taxed as Separate Entity and Dividends/Capital Gains also Taxed [Double Taxation]

Corporations Glencoe Entrepreneurship: Building a Business SECTION 7.2 Chapter 7 Types of Business Ownership MANAGEMENT Sole Proprietorship General Partnership Corporation Sole Proprietor has Complete Management Control All Partners have Equal Rights in Partnership’s Management and Conduct  Managed by Board of Directors elected by Shareholders; Board may Delegate Authority to Appointed Officers

Corporations Glencoe Entrepreneurship: Building a Business SECTION 7.2 Chapter 7 Types of Business Ownership WITHDRAWAL OF OWNER Sole Proprietorship General Partnership Corporation Terminates Sole Proprietorship Partner Death or Withdrawal may Terminate Partnership Corporation has Unlimited Life

Corporations Glencoe Entrepreneurship: Building a Business SECTION 7.2 Chapter 7 Types of Business Ownership Cooperatives A business owned equally by its members Have a common relationship, goal or economic purpose –E.g. retail cooperatives are created to provide goods to members at reduced prices Advantages One vote per member rule allows each member an equal say in all management decisions. Limited personal liability Profits that are not reinvested into the business go back to its members in the form of dividends Disadvantages Decision making process can be difficult when many equal members have different ideas. Limited ability to raise capital because it must come from existing members

Corporations Glencoe Entrepreneurship: Building a Business SECTION 7.2 Chapter 7 Types of Business Ownership Government Enterprise/Crown Corporations Corporations that are owned by the “crown” (government) Businesses owned by federal, provincial or municipal government. Generally provide services that private sector won’t offer because the profits are lower compared to the amount of capital invested OR they may establish an enterprise to build competition in an industry They are meant to operate in the interest of the public instead of the interest of the shareholders Some people argue that government enterprises can be less efficient and productive than private ones