1. Essential Standard 2.00 Understand the nature of business. 1

2. Objective 2.01 Understand the types of business ownership. 2

3. Types of Business Ownership Sole Proprietorship Partnership Corporation Cooperative Franchise Sole proprietorship is the most common in the United States Corporation counts for the most revenue in the United States 3

4. Sole Proprietorship One person owns the business The owner may manage business, or choose to have someone manage for them, and participate in daily operations and decision-making. Easiest form of ownership to start. Varies between states but in North Carolina, register your business name with the appropriate government entity and then get a business license and/or permits. 4

5. Sole Proprietorship Advantages & Disadvantages Advantages for Owner Disadvantages for Owner Easy to form Complete control of business Recipient of 100% of the profit One time taxation Limited capital Unlimited liability Limited lifetime 5

6. Sole Proprietorship continued How is a sole proprietorship terminated? The owner decides to terminate the business or the owner dies. Some sources of funding that may be used for investment are personal, gifts, borrowed. What are some local examples? 6

7. Partnership Association of two or more people to carry on as co-owners of a business for profit are considered for a partnership ownership Who manages a partnership is determined by partnership agreement. It may be one or more partners, or someone that has been hired to manage the day-to-day operations. 7

8. Partnership Continued A partnership is formed with a partnership agreement. Some states only require a verbal agreement but it is better to have a written agreement. Most states also require a business name and the name of each partner be registered. 8

9. Partnership Continued In North Carolina, partners must choose a name for their business, register the business name with the appropriate government entity, sign a partnership agreement, and then get a business license and/or permits. 9

10. Partnership Advantages & Disadvantages Advantages for Partners Disadvantages for Partners Easy to form More capital and credit available Work load more evenly shared Losses are also shared Unlimited liability Limited lifetime – if partner leaves or dies Profits are shared Decisions are made jointly Hard to add other partners 10

11. Partnership continued Partnerships are terminated by actions of the partners, bankruptcy, death, and/or court order. Some sources of funding that can be used for investments by partners are personals of partner(s), gifts, borrowed. Some examples of partnerships would be South Railroad Limited Partnership, Eden Limited Partnership, (Law and accounting firms are usually good examples for local partnerships.) 11

12. Specialized Partnerships An investor would choose a limited liability partnership if an investor does not want to lose more than the amount of their investment and does not care to be involved in every day operations. Businesses choose to enter into a joint venture when the businesses only want to be partners for a limited time and for a specific reason/project. “by proof of existence” is a term used for partnerships or joint ventures that don’t have a formal agreement and just conduct business together. In this case, partners may or may not be aware of their formed partnership. 12

13. Types of Partners Type of Partner Participation in the Business Relationship to the Public Degree of Liability General*ActiveKnownUnlimited DormantNot activeUnknownUnlimited LimitedNot activeKnownLimited SecretActiveUnknownUnlimited SilentNot activeKnownUnlimited 13 *Every partnership must have at least one general partner.

14. Corporation Stockholder (shareholders) own a corporation or an entity with the legal authority to act as a single person. The ownership is determined by purchase of stock A stockholder, or shareholder, owns a ‘piece’ of the company One share of common stock equals one vote 14

15. Corporation continued Managers, board of directors, and shareholders manage a corporation. Corporations are formed by filing of an article of incorporation with state government. 15

16. Corporation continued The business must create corporate bylaws, name a board of directors, and issue shares of stock. In North Carolina, the business must choose a name, choose board of directors, file articles of incorporation, create bylaws, hold a meeting, issue stock, obtain licenses, determine tax obligations, and open a bank account for the business. 16

17. Corporation Advantages & Disadvantages Advantages of Corporations Disadvantages of Corporations Capital easy to obtain Limited liability for shareholders Can invest without having to manage day- to-day operations Possibility of unlimited lifetime of business Decision-making is shared Double taxation: profits and earnings Subject to more laws than other types of ownership More difficult to form Operations controlled by shareholders and board of directors instead of original owner(s) Example: 10 years after founding Apple, Steve Jobs was fired by the board of directors. 17

18. Corporation continued A corporation is terminated when determined by charter or articles of dissolution, and must be approved by the majority of the board of directors and/or stockholders (shareholders). Corporation may have unlimited life. The source of investment for corporations is by the purchase of stock shares. Some examples are Walmart, Microsoft, Ford Motor Company, Coca-Cola, Delta. 18

19. Specialized Corporations An S-corporation treats each partner/owner as an individual by taxing them only one time. A small business operate as an limited liability company (LLC) to receive limited liability protection. No articles of incorporation or bylaws are needed. 19

20. Specialized Corporations continued The public benefits from services of a nonprofit corporation They are exempt from taxation. May get grants from the individuals or businesses to raise funds. 20

21. Cooperatives or Co-Ops An individual or business would choose to be part of a cooperative because they are formed by a group of individuals or businesses to serve their needs in order to gain bargaining power against bigger businesses. Allows for goods or services to be purchased at a lower price as a group and is owned by the members of the cooperative. Some examples of a cooperative would be agricultural cooperatives, housing cooperatives, utility cooperative, credit unions (cooperative banking) 21

22. Franchises An individual would choose a franchise as a form of business because it grants permission to sell products and services to another business. It offers brand/product recognition and a proven format of business that is successful. Some examples of a franchise would be Jackson- Hewitt Tax Services, Burger King, Firestone Tires and local stores selling Shell gas 22