
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

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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› 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.

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
› 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
› 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

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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1.
2.
3.
4.
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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
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

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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
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

Functions of Business
› 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
› 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.
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.
