1. 6
Chapter
Business Ownership
and Operations pp

2. Learning Objectives After completing this chapter, you’ll be able to:
Name the three forms of business ownership.
Compare the types of ownership.
continued

3. Learning Objectives After completing this chapter, you’ll be able to:
Describe alternative ways to do business.
Identify the different types of businesses.

4. Why It’s Important
You need to understand business ownerships and operations before starting a business.

5. Types of Business Ownership
The three different ways you can own a business are:
Sole proprietorship
Partnership
Incorporation

6. Sole Proprietorship
A sole proprietorship is a business owned by only one person.

7. Sole Proprietorship The advantages to having your own business are:
It’s easy to start
You get to be your own boss
You get to keep all the profits
The taxes are usually low

8. Sole Proprietorship The disadvantages to having your own business are:
You have to pay for everything yourself
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9. Sole Proprietorship
You might have to use your personal savings or borrow money from the bank
You might lack business skills

10. Sole Proprietorship
A serious disadvantage to owning a sole proprietorship is that you have unlimited liability, or full responsibility for your company’s debts.

11. Partnership
A partnership is a business owned by two or more persons who share the risks and rewards.

12. Partnership
To start a partnership you need to draw up a partnership agreement, which is a contract that outlines the rights and responsibilities of each partner.

13. Partnership The advantages to partnership are:
You might need only a license to start and have to pay taxes only on your personal profits.
Each of your partners can contribute money to start the business.
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14. Partnership
Banks are often more willing to lend money to partnerships than sole proprietorships.
Your partners can bring different skills to the business.

15. Partnership The disadvantages to partnership are:
You not only share the risks with your partners, you also share the profits.
continued

16. Partnership You might not get along with your partners.
You share unlimited legal and financial liability with your partners.

17. Graphic Organizer Similarities and Differences Between
Partnerships and Sole Proprietorships
Partnerships
Both
Sole Proprietorships
Quicker decision making
Owner keeps all profits
Owner is own boss
Relatively easy to get credit
Shared decision making
Pride in owning and running business
Easy to set up
Low taxes
Unlimited liability for debts
Huge time demands
Increased diversity of experience
Shared losses
Combined funds

18. Corporation
A corporation is a business owned by many people but treated by law as one person.

19. Corporation
To form a corporation, you need to get a corporate charter from the state your headquarters is in.

20. Corporation
To raise money, you can sell stock, or shares of ownership in your corporation.

21. Corporation
For each share of common stock, the stockholder gets a share of the profits and a vote on how the business is run.
You also must have a board of directors who control the corporation.

22. Corporation
A major advantage of a corporation is its limited liability.
If your company loses money, the stockholders lose only what they invested.

23. Corporation
Another advantage is that the corporation doesn’t end if the owners sell their shares.

24. Corporation
A disadvantage of a corporation is that you often have to pay more taxes.

25. Corporation
The government closely regulates corporations.

26. Corporation
It is more difficult to start a corporation than a sole proprietorship or a partnership and running a corporation can be much more complicated.

27. Figure
6.1
GENERATIONS OF FAMILY-OWNED BUSINESSES
Family-owned businesses are sometimes kept in the family for more than one generation.
What percentage of families have had their family-owned businesses for two or more generations?

28. What are some of the advantages of a sole proprietorship?
Fast Review
What are some of the advantages of a sole proprietorship?
What is the difference between a sole proprietorship and a partnership?
continued

29. What are the disadvantages of a corporation?
Fast Review
If a partner makes a bad business decision, what responsibility do the other partners have?
What are the disadvantages of a corporation?