1. Business Ownership and Operations
Intro To Business
Chapter 6

2. Learning Targets Section 6.1 – Types of Business Ownership
Describe 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. Types of Business Ownership
Sole Proprietorship
A business owned by one person. Three-quarters of all businesses in the U. S. take this form of organization
Advantages:
Easy to do (licenses/permits)
In charge of their business
Can make all of the decisions
Can keep all of the profits
Usually have lower taxes (taxed once)
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4. Types of Business Ownership
Disadvantages:
Unlimited liability
The owner is responsible for the company’s debt’s. If the owner has more debt than they receive, the owner has to make up the difference.

5. Types of Business Ownership
Partnership
A business owned by two or more people who share its risks and rewards.
Advantages:
Easy to start
Easier to obtain capital
Banks are often more willing to lend money
Taxed only once
Each partner brings specific skills and talents

6. Types of Business Ownership
Disadvantages
All of the partners share the risk
Problems with partners getting along
Unlimited Liability
Corporation
Company that is registered by a state and operates apart from its owners
To raise money, the owners can sell stock or shares of the company

7. Types of Business Ownership
Advantages
Limited Liability
Holds a firms owners responsible for no more than the capital that they have invested in it.
Ability to raise money by selling stock
Company does not end if an owner dies
Disadvantages
Double taxes
Extra governmental restrictions
More difficult and costly to start

8. Types of Business Ownership
Other ways to Organize a Business
Cooperative
An organization that is owned and operated by its members
When a group of businesses pool their resources
Purpose – to save money on the purchase of certain goods and services Ex. Ocean Spray
Nonprofit Organization
Type of organization that focuses on a providing a service, but not to make a profit.
Must register with the government. Because they do not make a profit they do not pay taxes. Ex. Churches
Franchise
A contractual agreement to use the name and sell the products or services of a company in a designated area
Ex. McDonalds, Tim Horton’s
You have to invest money and pay franchise fees or share the profits.
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9. Questions/Reflection
What is the difference between a sole proprietorship and a partnership?
If a partner makes a bad decision, what responsibility do the other partners have?
Why are cooperatives formed?
Compare limited liability and unlimited liability.
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10. Learning Targets Section 6.2 – Types and Functions of Businesses
Differentiate the six types of businesses
Describe the five functions of business
Discuss how the five functions of business relate to each other

11. Types and Functions of Businesses
Types of Business
Producers
Business that gathers raw goods
Agriculture, mining, fishing, and forestry
Processors
Changes raw materials into more finished products
Made from raw goods that require further processing
Crude oil to gasoline, iron ore into steel
Manufacturers
Makes finished products out of processed goods
Cars, CD’s, Computers
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12. Types and Functions of Businesses
Intermediaries and Wholesalers
Intermediary – A business that moves goods from one business to another
Buys goods, stores them and resells them
Wholesaler – Distributes goods
Retailers and Service Businesses
Retailer – Purchases goods from wholesaler and sells them to consumer
Record stores and auto dealers

13. Types and Functions of Businesses
Production and Procurement
Production – Process of creating, expanding, manufacturing or improving goods and services
Procurement – The buying and reselling of goods that have already been produced.
Marketing
Process of planning, pricing, promoting, selling and distributing ideas, goods, and services
Getting consumers to buy the product

14. Types and Functions of Businesses
Management
The process of achieving company goals by planning, organizing, directing, controlling and evaluating the effective use of resources.
Finance and Accounting
Finance – The business or art of money management
Requires analyzing financial statements to make future decisions
Accounting – Maintaining and checking records, handling bills and preparing financial reports for a business.

15. Questions What is the difference between a producer and a processor?
Identify the five functions of business.
Give an example of how the accounting and finance functions can affect a business’s marketing and production processes.