Types of Businesses

ENTREPRENEUR Someone who takes the necessary risks and rewards in starting a business. An Entrepreneur is out to make money. He/she needs to decide how the business is going to work. Someone who starts a business can start it with any of three business models.

Proprietorship Advantages ◦Owner has complete control ◦Small initial investment ◦Owner receives all profits ◦Owner can dissolve the business when necessary

Proprietorship Disadvantages ◦All losses are born by the owner ◦Difficulty raising financial capital (money) ◦Only one person in authority ◦Owner pays all taxes ◦Unlimited liability

Partnership Advantages ◦Two or more people own the business ◦Losses are shared ◦More money available ◦Sharing of management ◦Taxes are shared

Partnership Disadvantages ◦Division of authority ◦Difficulty raising additional capital ◦Legal problems when changing ownership ◦Unlimited Liability

Corporation Advantages ◦Easy to raise needed capital ◦Owned by a group ◦Responsibilities divided among many people ◦Easy change of ownership without legal problems ◦Limited liability

Corporation Disadvantages ◦Most expensive business to start ◦Business is taxed on profits, stockholders are taxed on dividends ◦Owners (stockholders) sometimes have little control ◦Market price of the stock does not mean the company is doing well.

STOCKS One person can buy a piece of a company As more people want to buy into that company, the price of stocks go up. When less people want to buy into that company, stocks go down. People may want to buy a piece of a company that sounds interesting, but the company is not very good.