Forms of Business Ownership 5-2

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. Goals

Proprietorship – a business owned and run by just one person. Easiest form of business to start and end. Few legal requirements & capital needs Allows for sole control over all business activity Receives & determines how all profits responsible for all business debt Business Ownership

Partnership – a business owned and controlled by two or more people who have entered into an agreement. Quite easy to start Owners are responsible decisions & functions Profits & investments are shared based on agreement Partnership agreement – a written agreement among all owners Each partner is liable for the debt

Corporation – a separate legal entity formed by documents filed with a state. Owned by one or more shareholders Managed by a board of directors Difficult to form (must meet more legal requirements) Not all owners have direct involvement in business decisions Owners will not have access to profits unless approved by the board of directors Corporations protect the liability of stockholders

Articles of incorporation – a written legal document that defines ownership and operating procedures and conditions for the business Corporate bylaws – the operating procedures for the corp.

Other Forms of Ownership Specialized Partnerships and Corp. Limited liability partnership: identifies investors who cannot lose more than the amt. of their investment, but are not allowed to participate in day-to-day management Joint venture: organized by tow or more other business to operate for a limited time and for a specific project. Nonprofit Corp.: a group of people who join to do some activity that benefits the public S-Corporation: offers limited liability of a corporation. All income is passed through to the owners based on their investment and is taxed on their individual tax returns. Other Forms of Ownership

Other Forms of Ownership S-Corporation: offers limited liability of a corporation. All income is passed through to the owners based on their investment and is taxed on their individual tax returns. Limited Liability Company (LLC): combines the best features of a partnership and corporation Other Forms of Ownership

Other Forms of Ownership Cooperatives and Franchises Cooperative: owned by members, serves their needs, and is managed in their interest. Franchise: a written contract granting permission to operate a business to sell products and services in a set way. Franchiser – the company the owns the product and service and grants the right to another business Franchisee – the company purchasing the rights to run the business Other Forms of Ownership