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Business Ownership and Operations

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Presentation on theme: "Business Ownership and Operations"— Presentation transcript:

1 Business Ownership and Operations
Chapter 6

2 6.1 Types of Business Ownership
Sole Proprietorship Partnerships Corporations

3 Organizing a Business As part of a business plan, entrepreneurs must decide which type of business best fits their situation. During the life of a business, the form of business can change, usually when a business is growing.

4 Sole Proprietorships A business owned by one person.
About ¾ (75%) of all businesses in the United States are sole proprietorships.

5 United States Sole Proprietorships, Partnerships, and Corporations

6 Advantages of Sole Proprietorships
Easy to do, may only need a license or permit Sole proprietors are in charge Make all decisions Keep all the profits Income taxes are lower than that of corporations Income only taxed once Lower tax rate

7 Disadvantages of Sole Proprietorship
Unlimited liability Owner responsible for company debts Limited access to credit, lenders are reluctant to lend money Many fail because they run out of money Person in charge may not have all skills necessary Ends when owner dies

8 Partnerships Owned by two or more people Share the risks
Partnership agreement is necessary Rights and responsibilities of each partner

9 Advantages of a Partnership
Easy to start Potential partners may need to obtain a license Easier to obtain capital Each partner contributes money to start Banks are more willing to lend money Not dependent on one person Income only taxed once Each partner brings different skills

10 Disadvantages of Partnerships
All partners share risks Partners do not get along all the time Partners decide to leave, must reorganize Partners share unlimited legal and financial liability All partners are responsible if the other makes a bad decision

11 Corporations Registered by a state Operates apart from its owners
Owners must get a corporate charter, a license to run a corporation, from the state where their main office is located Owners sell stocks Stocks-shares in the company Must have a board of directors

12 Advantages of a Corporation
Limited liability Ability to raise money when people buy stock in the company Does not end if one owner dies, deceased owners shares are sold, business continues

13 Disadvantages of a Corporation
Pay taxes on their income Stockholders pay taxes on profits issued to them—double taxation S corporations and limited liability companies don’t pay double taxation Government regulates Difficult and costly to start

14 Other ways to Organize a Business
Cooperative- organization owned and operated by its members, they pool their resources together, purpose is to save money on purchases of certain goods and services. (Ocean Spray) Nonprofit Organization- focuses on providing a service, but not to make a profit. Must register with the government. Do not pay taxes. Franchise- a contractual agreement to use the name and sell the product or service of a company in a geographic area. Have to invest money and pay a franchise fee or a share in the profits. The franchiser returns the favor by giving the product and the business plan.

15 6.2 Types and Functions of Businesses
Types of Businesses Producers Processors Manufacturers Intermediaries and wholesalers Retailers and Service Businesses Functions of Businesses Production and Procurement Marketing Management Finance and Accounting

16 Producers Gathers raw goods Ex: Agriculture Mining Fishing Forestry

17 Processors Changes raw materials into more finished products. Ex:
Sugar cane is turned into sugar Crude oil into gasoline Iron ore into steel

18 Manufacturers Make finished products out of processed goods. Ex: Cars
CDs Computers

19 Intermediaries and Wholesalers
Moves goods from one business to another Buys goods, stores them, and then resells them Wholesalers distribute goods. Wholesalers divide the large quantities into smaller ones and sells them to retailers.

20 Retailers and Service Businesses
Purchases goods from a wholesaler and sells them to consumers. Ex: Service Stations Record stores Auto dealers Service businesses performs tasks. Medical clinics Law firms

21 Production and Procurement
Production is process of creating, expanding, manufacturing, or improving goods and services. Procurement is the buying and reselling of goods that have already been produced.

22 Marketing The process of planning, pricing, promoting, selling, and distributing ideas, goods, and services. Getting consumers to buy a product or service. Decisions based on market research.

23 Management The process of achieving company goals by planning, organizing, leading, controlling, and evaluating the effective use of resources.

24 Finance and Accounting
Finance is the business or art of money management. Analyzing financial statements to make future decisions. Accounting is maintaining and checking records, handling bills, and preparing financial reports.

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