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Types of Business Ownership Chapter 6.1

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1 Types of Business Ownership Chapter 6.1
Introduction to Business and Marketing

2 The Main Idea Sole proprietorships, partnerships, and corporations are the most common forms of business organization. Cooperatives, nonprofits, and franchises are other forms.

3 Organizing a Business The three main types of business organizations are: Sole Proprietorships Partnerships Corporations

4 Types of Business Ownership
Figure 6.1 U.S. Sole Proprietorships, Partnerships, and Corporations

5 Sole Proprietorship About 3/4 of all businesses in the United States are sole proprietorships. sole proprietorship a business owned by one person

6 Sole Proprietorship Advantages Disadvantages Easy to start
Owner keeps all the profit Owner has total control Taxes are lower than a corporation Unlimited liability Limited access to credit Owner may not have the necessary skills Many run out of money Business dissolves when owner dies

7 Partnership To start a partnership you must have a partnership agreement partnership a business owned by two or more people who share its risks and rewards

8 Partnership Advantages Disadvantages Easy to start
Easier to get capital Easier to obtain credit Not dependent on one person Only taxed once Diversity of skills Business risk is shared among all partners Unlimited legal and financial liability is shared If one member makes a mistake all are responsible

9 Corporations To form a corporation, the owners must get a corporate charter from the state where their main office will be located corporation a company that is registered by a state and operates apart from its owners

10 Corporations One of the major advantages of a corporation is limited liability limited liability holds a firm’s owners responsible for no more than the capital that they have invested in it

11 Corporation Advantages Disadvantages Limited Liability
Ability to raise money by selling stock Business does not end when an owner dies Double taxation Income Stock holder dividends More government regulation Difficult and costly to start

12 OTHER ways to Organize a Business
Other ways to organize a business include: Cooperative Nonprofit Organization Franchise

13 Cooperative The purpose of a cooperative is to save money on the purchase of certain goods and services cooperative an organization that is owned and operated by its members

A nonprofit organization does not pay taxes because it does not make a profit nonprofit organization a type of business that focuses on providing a service, not making a profit

15 FRANCHISE The run a franchise, you have to invest money and pay franchise fees or a share of the profits franchise a contractual agreement to use the name and sell the products or services of a company in a designated geographic area

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