Chapter
5
Sections 5.6 – 5.10
Small Business and Forms
of Business Ownership
Learning Objectives
1
Discuss why most businesses are
small businesses.
5
Outline the forms of private business
ownership.
2
Determine the contributions of small
businesses to the economy.
6
Describe the public and collective
ownership of business.
3
Discuss why small businesses fail.
7
Discuss organizing a corporation.
4
Identify the available assistance for
small businesses.
8
Explain what happens when businesses
join forces.
Chap 5 Sec 1-5
Chap 5 Sec 6-10
Franchising
Using another company’s established
business model
Can reduce the amount of time and effort to
succeed
Agreements can be complicated
Initial start up fees & set up costs
SUBWAY $116,000
McDonald’s $1,000,000
Franchise fees – set amount or percentage
Restrictions to pricing and offerings
Discuss Anytime Fitness Takes Top
Franchise Spot from page 127
Forms of Private Business
Ownership
Figure 5.4 Forms of
Business Ownership
Sole Proprietorship
Pros
Cons
Simplest
Personally responsible for all
debts & liabilities
Most flexible
Owner could lose personal &
business assets
Easiest to start
Partnership
Pros
Cons
All partners share profits
equally
All partners share losses
equally
Partners can agree to different Each partner is fully
distribution
responsible for all liabilities
One partner can bind the
other partners in contracts
Corporation
Pros
Cons
The corporation makes the
money and pays the taxes
The corporation loses and owes
the money
The corporation is liable – not The corporation owns the assets –
the individual owners
not the individual owners
Owners cannot lose more
than they actually invest
Expensive to start up – need
approval from the state
More accounting and double
taxation
Types of Corporations
• For Profit & Not-for- Profit
• Domestic – chartered in a particular state
• Foreign – does business in one state but
is chartered in another state
• Alien – chartered in another nation
May choose to incorporate in a different
state for simplicity or tax incentives
Types of Corporations
S Corporation
Limited Liability
Companies
Employee-Owned
Corporations
Read pages 145-147
Corporate Charter
Organizing a Corporation
Stockholders – acquire stocks in
exchange for ownership
Preferred Stock & Common Stock
May receive dividends
Board of Directors – elected by
stockholders to oversee corporation
– they also decide if/when to
distribute dividends
Corporate Officers &
Management – make major
corporate decisions and handle
ongoing operations
Read Solving an Ethical Controversy: Do
Some CEPs Earn Too Much? On page 151
When Businesses Join Forces
Mergers and Acquisitions (M&A)
Merger – combination of two or more firms to form one
company
Acquisition – procedure in which one firm purchases the
property and assumes the obligations of another
Joint Venture – partnership between companies
for a specific purpose
Seventh Generation
Show End of Chapter Video
Forms of Business Assignment
Review Questions - pg 156
Answer questions 6 and 7
Projects and Teamwork Applications – pg 156
Answer question #2
Web Assignments – pg 156
Answer question #1 or #3
Type your answers to the four questions.
Include the section and question number.
You do not need to include the actual question.