Unit 4—Ownership Structures
Finance Foundations A
Mrs. Sorrell
Three Types of Business Ownership
 Sole proprietorship
 Partnership
 Corporation
Sole Proprietorship
 Owned by one person
 Small business






Jewelry store
Restaurants
Hair-styling salons
Physicians
Attorneys
Accountants




Supplies
Advertising
Rent
Taxes
 Owner pays for everything
 Use personal savings or
borrow
 More than two-thirds of U.S.
business
 Proprietor has complete
responsibility for business
decisions
 Unlimited liability—full
responsibility for your
company’s debts
 May need only a license or
permit to start your sole
proprietorship
Partnerships
 Owned and managed by a
small group
 Share the risks and
rewards
 Written agreement
(contract)
 Unlimited liability for the
debts of the partnership
 License to start
 Pay taxes only on
personal profits
 Easier to obtain capital
 Different skills of partners
 All partners equally
responsible for bad
decisions of one partner
Corporations
 Business owned by a
number of people and
operated under written
permission (Certificate of
incorporation) from the
state in which it is located
 People become owners
by buying shares of stock-shareholders
 Corporation is treated as
one person
 To raise money, you can sell
shares of ownership
 Each share gets a portion of
the profit and a vote on
business operations
 Board of directors control
the operation
 Hire officers to run the
business
Corporations, con’t.
 Limited liability is the
major advantage
 Personal property and
savings are not at risk
 Owners can sell their
shares and the business
does not change or end
 Sell new shares to raise
more capital
 Corporations often have to
pay more taxes
 Owners are taxed on their
income
 Corporation pays taxes also
(double taxation)
 Government closely
regulates corporations
 More difficult to start and
run a corporation
E-Commerce
 Buying and selling goods
and services via the internet
 Reach customers anywhere
in the world
 Catalogs on the internet
save big money in printing
and mailing
 Consumers can shop 24/7
 Privacy of the customer is of
concern
 Be careful where you shop
 Keep a record of you
receipts, order
confirmations, and
merchant’s Internet address
 Web Trust is assurance
service that combat security
and privacy issues when
conducting shopping,
banking, and other online
transactions.