1. Business Ownership and Operations Chapter 6 pp. 84-97

2. Introduction to Business, Business Ownership and Operations Slide 2 of 69 Learning Objectives After completing this chapter, you’ll be able to: 1.Name 1.Name the three forms of business ownership. 2.Compare 2.Compare the types of ownership. 3.Describe 3.Describe alternative ways to do business. 4.Identify 4.Identify the different types of businesses.

3. Introduction to Business, Business Ownership and Operations Slide 3 of 69 Key Words sole proprietorship unlimited liability partnership corporation stock limited liability Franchise nonprofit organization continued

4. Introduction to Business, Business Ownership and Operations Slide 4 of 69 Key Words cooperative producer processors manufacturers Intermediaries wholesaler retailer

5. Introduction to Business, Business Ownership and Operations Slide 5 of 69 Types of Business Ownership The three different ways you can own a business are: Sole proprietorship Partnership Incorporation

6. Introduction to Business, Business Ownership and Operations Slide 6 of 69 Sole Proprietorship A sole proprietorship is a business owned by only one person.

7. Introduction to Business, Business Ownership and Operations Slide 7 of 69 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. Introduction to Business, Business Ownership and Operations Slide 8 of 69 Sole Proprietorship The disadvantages to having your own business are: You have to pay for everything yourself You might lack business skills continued

9. Introduction to Business, Business Ownership and Operations Slide 9 of 69 Sole Proprietorship- Sole Proprietorship- disadvantages You might have to use your personal savings or borrow money from the bank A serious disadvantage to owning a sole proprietorship is that you have unlimited liability, or full responsibility for your company’s debts.

10. Introduction to Business, Business Ownership and Operations Slide 10 of 69 Partnership A partnership is a business owned by two or more persons who share the risks and rewards.

11. Introduction to Business, Business Ownership and Operations Slide 11 of 69 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.

12. Introduction to Business, Business Ownership and Operations Slide 12 of 69 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. continued

13. Introduction to Business, Business Ownership and Operations Slide 13 of 69 Partnership Banks are often more willing to lend money to partnerships than sole proprietorships. Your partners can bring different skills to the business.

14. Introduction to Business, Business Ownership and Operations Slide 14 of 69 Partnership The disadvantages to partnership are: You not only share the risks with your partners, you also share the profits. continued

15. Introduction to Business, Business Ownership and Operations Slide 15 of 69 Partnership You might not get along with your partners. You share unlimited legal and financial liability with your partners.

16. Introduction to Business, Business Ownership and Operations Slide 16 of 69 Graphic Organizer Similarities and Differences Between Partnerships and Sole Proprietorships Increased diversity of experience Shared losses Combined funds Both Pride in owning and running business Easy to set up Low taxes Unlimited liability for debts Huge time demands Quicker decision making Owner keeps all profits Owner is own boss Relatively easy to get credit Partnerships Sole Proprietorships Shared decision making

17. Introduction to Business, Business Ownership and Operations Slide 17 of 69 Corporation A corporation is a business owned by many people but treated by law as one person.

18. Introduction to Business, Business Ownership and Operations Slide 18 of 69 Corporation To form a corporation, you need to get a corporate charter from the state your headquarters are located.

19. Introduction to Business, Business Ownership and Operations Slide 19 of 69 Corporation To raise money, you can sell stock, or shares of ownership in your corporation.

20. Introduction to Business, Business Ownership and Operations Slide 20 of 69 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.

21. Introduction to Business, Business Ownership and Operations Slide 21 of 69 Corporation A major advantage of a corporation is its limited liability. If your company loses money, the stockholders lose only what they invested.

22. Introduction to Business, Business Ownership and Operations Slide 22 of 69 Corporation Another advantage is that the corporation doesn’t end if the owners sell their shares.

23. Introduction to Business, Business Ownership and Operations Slide 23 of 69 Corporation A disadvantage of a corporation is that you often have to pay more taxes. The government closely regulates corporations.

24. Introduction to Business, Business Ownership and Operations Slide 24 of 69 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.

25. Introduction to Business, Business Ownership and Operations Slide 25 of 69 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?

26. Introduction to Business, Business Ownership and Operations Slide 26 of 69 Alternative Ways to Do Business Franchises, cooperatives, and nonprofit organizations offer you other ways to do business.

27. Introduction to Business, Business Ownership and Operations Slide 27 of 69 Franchise A franchise is a contractual agreement to sell a company’s products or services in a designated geographic area.

28. Introduction to Business, Business Ownership and Operations Slide 28 of 69 Franchise To run a franchise you have to invest money and pay the franchisor an annual fee or a share of the profits. In return, the franchisor offers a well- known name and a business plan.

29. Introduction to Business, Business Ownership and Operations Slide 29 of 69 Franchise You can operate a franchise yourself, as a sole proprietor, as a partnership with someone else, or even as a corporation.

30. Introduction to Business, Business Ownership and Operations Slide 30 of 69 Franchise An advantage of opening a franchise is that it’s easy to start. The name of the parent company can be a big draw for customers.

31. Introduction to Business, Business Ownership and Operations Slide 31 of 69 Franchise The disadvantage of running a franchise is that the franchisor is often very strict about how the business is run.

32. Introduction to Business, Business Ownership and Operations Slide 32 of 69 Nonprofit Organization A nonprofit organization is a type of business that focuses on providing a service rather than making a profit.

33. Introduction to Business, Business Ownership and Operations Slide 33 of 69 Nonprofit Organization Like a corporation, a nonprofit organization has to register with the government and might be run by a board of directors.

34. Introduction to Business, Business Ownership and Operations Slide 34 of 69 Nonprofit Organization Because it doesn’t make a profit, a nonprofit organization doesn’t have to pay taxes.

35. Introduction to Business, Business Ownership and Operations Slide 35 of 69 Nonprofit Organization Donors don’t receive dividends like investors, but they can deduct their donations from their taxes.

36. Introduction to Business, Business Ownership and Operations Slide 36 of 69 Cooperative Cooperative A cooperative is an organization owned and operated by its members for the purpose of saving money on the purchase of certain goods and services.

37. Introduction to Business, Business Ownership and Operations Slide 37 of 69 Cooperative Cooperative A cooperative is like a corporation in that it exists as a separate entity from the individual businesses.

38. Introduction to Business, Business Ownership and Operations Slide 38 of 69 Cooperative Cooperative A cooperative can sell stock and choose a board of directors to run it. Cooperatives pay less in taxes than regular corporations do.

39. Introduction to Business, Business Ownership and Operations Slide 39 of 69 Cooperative Cooperative Cooperatives can save money by buying insurance, supplies, and advertising as a group.

40. Introduction to Business, Business Ownership and Operations Slide 40 of 69 Types of Businesses One way to classify businesses is to group them by the kind of products they provide: Producing raw goods Processing raw goods continued

41. Introduction to Business, Business Ownership and Operations Slide 41 of 69 Types of Businesses Manufacturing goods from raw or processed goods Distributing goods Providing services

42. Introduction to Business, Business Ownership and Operations Slide 42 of 69 Producers A producer is a business that gathers raw products in their natural state. Raw goods are materials gathered in their original state from natural resources such as land and water.

43. Introduction to Business, Business Ownership and Operations Slide 43 of 69 Processors Processors change raw materials into more finished products. Processed goods are made from raw goods and may require further processing.

44. Introduction to Business, Business Ownership and Operations Slide 44 of 69 Manufacturers Manufacturers are businesses that make finished products out of processed goods. The finished products need no further processing and are ready for market.

45. Introduction to Business, Business Ownership and Operations Slide 45 of 69 Intermediaries An intermediary is a business that moves goods from one business to another. It buys goods, stores them, and then resells them.

46. Introduction to Business, Business Ownership and Operations Slide 46 of 69 Intermediaries A wholesaler, also known as a distributor, distributes goods.

47. Introduction to Business, Business Ownership and Operations Slide 47 of 69 Intermediaries Wholesalers buy goods from manufacturers in huge quantities and resell them in smaller quantities to their customers, usually other companies.

48. Introduction to Business, Business Ownership and Operations Slide 48 of 69 Intermediaries A retailer purchases goods from a wholesaler and resells them to the consumer, or the final buyer of the goods.

49. Introduction to Business, Business Ownership and Operations Slide 49 of 69 Service Businesses Service businesses provide services rather than goods. Services are the products of a skill or an activity, such as hairstyling and car repair.

50. Introduction to Business, Business Ownership and Operations Slide 50 of 69 Service Businesses Some service businesses meet needs, such as medical clinics and law firms. Some provide conveniences, such as taxi companies and copy shops.