Presentation on theme: "Read to Learn Describe the advantages and disadvantages of the three major forms of business organizations. Describe how cooperatives and nonprofits are."— Presentation transcript:
2 Read to LearnDescribe the advantages and disadvantages of the three major forms of business organizations.Describe how cooperatives and nonprofits are like and unlike corporations and franchises.
3 Key Termsole proprietorshipa business owned by one personunlimited liabilitywhen the owner is responsible for the company’s debts
4 Key Terma business owned by two or more people who share its risks and rewardspartnershipa company that is registered by a state and operates apart from its ownerscorporation
5 Key Termholding a firm’s owners responsible for no more than the capital that they have invested in itlimited liabilityan organization that is owned and operated by its memberscooperative
6 Key Terma type of business that focuses on providing service, not on making a profitnonprofit organizationa contractual agreement to use the name and sell the products or services of a company in a designated geographic areafranchise
7 The three main types of business organizations are: Organizing a BusinessThe three main types of business organizations are:Sole ProprietorshipsPartnershipsCorporations
8 U.S. Sole Proprietorships, Partnerships, and Corporations Figure 6.1U.S. Sole Proprietorships, Partnerships, and Corporations
9 Sole Proprietorships Advantages of Sole Proprietorships Easy to start Proprietors are in chargeProprietors keep all the profitsTaxes are lower than a corporation’s
10 Sole ProprietorshipsA major disadvantage of owning a sole proprietorship is that the owner has unlimited liability.unlimited liabilitywhen the owner is responsible for the company’s debts
11 Sole Proprietorships Disadvantages of Sole Proprietorships Limited access to creditMany run out of moneyThe owner may not have the necessary skillsThe business ends when the owner dies
12 To start a partnership, you need a partnership agreement. PartnershipsTo start a partnership, you need a partnership agreement.partnershipa business owned by two or more people who share its risks and rewards
13 Partnerships Advantages of Partnerships Easy to start Easier to obtain capitalEasier to obtain creditNot dependent on a sole personOnly taxed onceDiversity in skills
14 Partnerships Disadvantages of Partnerships Business risk is sharedUnlimited legal and financial liability is sharedIf one partner makes a mistake, all partners are responsible
15 CorporationsTo form a corporation, the owners must get a corporate charter from the state where their main office will be located.corporationa company that is registered by a state and operates apart from its owners
16 Limited liability is a major advantage of a corporation. CorporationsLimited liability is a major advantage of a corporation.limited liabilityholds a firm’s owners responsible for no more than the capital that they have invested in it
17 Corporations Advantages of Corporations Limited liability Ability to raise money by selling stockBusiness does not end when an owner dies
18 Corporations Disadvantages of Corporations Double taxation More government regulationDifficult and costly to startIncome is taxed.Stockholders pay taxes on profits issued to them
19 Other Ways to Organize a Business Other ways to organize a business include:CooperativeNonprofit OrganizationFranchise
20 Other Ways to Organize a Business The purpose of a cooperative is to save money on the purchase of certain goods and services.cooperativean organization that is owned and operated by its members
21 Other Ways to Organize a Business A nonprofit organization does not pay taxes because it does not make a profit.nonprofit organizationa type of business that focuses on providing a service, not making a profit
22 Other Ways to Organize a Business To run a franchise, you have to invest money and pay franchise fees or a share of the profits.franchisea contractual agreement to use the name and sell the products or services of a company in a designated geographic area
23 Car SharingCar sharing is a popular European process in which many households share vehicles.Mobility CarSharing cooperative in Switzerland has over 50,000 clients.
24 Compare & Contrast Sole Proprietorship Partnership Corporation Start-up ProcessLiabilityTaxationAccess to credit and capitalAfter an owner dies or leavesEasy to StartEasy to StartDifficult to StartUnlimited LiabilityUnlimited LiabilityLimited LiabilitySingle TaxationSingle TaxationDouble TaxationLimited access to capital and creditEasier to access than sole proprietorshipEasier to access than other formsEnds when owner diesMust reorganize when partner leavesLife continues after an owner dies
25 What is the difference between a sole proprietorship and a partnership? A sole proprietorship is owned by one person. A partnership is owned by two or more people.
26 If a partner makes a bad decision, what responsibility do the other partners have? All partners share responsibility for abad decision.
27 Why are cooperatives formed? so that the members have advantagesin buying and selling products andservices