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Chapter 6
Business Ownership and Operations
Types of Business Ownership
Sole Proprietorship:
A business owned by only one person
Advantages:
- easy to start
- set your own hours
- make all the decisions
- get to keep all the profits
- single taxation
Disadvantages:
Unlimited Liability: (full responsibility)
You are responsible for ALL of the
business’ debts!
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Chapter 6
Business Ownership and Operations
Types of Business Ownership (cont’d)
Partnership:
A business owned by two or more
people who share all of the risks and
all of the rewards
Advantages:
- More people can contribute
- Easier to raise start-up capital
- Can divide and focus on specific tasks
- Share risk
- single taxation
Disadvantages:
- harder to set up than sole proprietorship
- share profits
- You’re responsible for your partner’s
decisions
- If one partner leaves the firm must be
reorganized
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Chapter 6
Business Ownership and Operations
Types of Business Ownership (cont’d)
Corporation:
A business owner by many people but treated
as one person by the law. It can own propert, pay
taxes, and make contract, be fined and can be
sued. Ownership of the corporation is in the form
of shares or stock.
Stock – shares in the ownership of a
corporation. Each share of common stock
entitles the holder to one vote at shareholders
meetings.
Advantages:
- Limited Liability – Owners are not
responsible for the debts of the corporation. The
most you can lose is what you paid for your stock.
(big advantage!)
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Chapter 6
Business Ownership and Operations
Corporations (cont’d)
Advantages (cont’d)
- Easy to raise capital
- Ownership can change very easily
Disadvantages:
- Harder to start
- Stock / share holders don’t always
control company.
- Board of Directors
- Double Taxation
- Owners only get a tiny pieces of profits
(& only when directors say so)
Types of Corporations:
 C-Corp: normal every day corp. w/full taxation
 S-Corp: Less than 25 shareholders taxed as a
partnership
 LLC Limited liability Corp:
- basically a partnership with Limited Liability
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Chapter 6
Business Ownership and Operations
Alternate ways of doing Business
Franchise:
A contractual agreement to sell a company’s
products or services in a given geographical area
Advantages of franchising
- proven business model/plan
- corporate advertising
- management training
- well known name
Disadvantages of a franchise
- have to pay franchise fee
- limited in what you can sell
- might be limited in how you
operate you business
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Chapter 6
Business Ownership and Operations
Alternate ways of doing Business (cont’d)
Nonprofit organization:
Focuses on providing a service instead
of making a profit
Advantages:
- NO TAXES
Disadvantages:
- investors (donors) don’t get
dividends
- Close government scrutiny
- Profits can only go to other
nonprofit organizations
Examples:
Charities
Churches
Clubs
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Chapter 6
Business Ownership and Operations
Alternate ways of doing Business (Cont’d)
Cooperative (Co-op):
An organization owned and operated by its
members for the purpose of saving money
on the purchase of certain goods
Examples:
Local farm co-op
Ocean Spray (that right the cranberry guys)
Advantage:
Small farmers, dealers, merchants can pool
resources to get tools, supplies, and services
they couldn’t get alone
Disadvantage:
Someone else might be using item you need
when you want it.
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Chapter 6
Business Ownership and Operations
Types of Businesses:
Producer:
A business that gathers raw goods
(material / natural resources) in there
natural state
Examples:
Coal miners – coal
Farmers - corn
Lumberjack – logs
Processor:
A business that changes raw good
into a more refined product – They
“process” raw goods.
Examples:
Coke plant – coal to coke
Mills – corn to corn flour
Saw mill – logs to boards
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Chapter 6
Business Ownership and Operations
Manufacturers:
Business that make final products
out of processed goods
Example:
Steel company - coke + ore to steel
Bakery – corn flour + eggs to corn chips
Cabinet company – boards + glass to cabinets
Intermediary:
A business that moves goods from one business to
another; they buy good, store them, and resells them.
Wholesaler (distributor):
Distribute goods, they buy large (huge)
quantities from manufacturers, then resell them in
smaller quantities to their customers (usually other
businesses called retailers)
Retailers – Purchase goods from wholesalers and
then resell them to consumers
Service Business – Service businesses provide services
instead of good to their customers.