CHAPTER 7
Pump Primer
• Define the term entrepreneur.
• Explain the difference between sole
proprietorship, partnership, & corporation.
CHAPTER 7
Forms of Business
Ownership
CHAPTER 7
Objectives:
• Define entrepreneur, sole proprietorship, partnership, &
corporation
• Compare the advantage and disadvantages of organizing a
business as a corporation, partnership, or sole proprietorship.
• Explain limited liability.
• Describe the Scriptural principles that apply to Christians
involvement in partnerships.
• Define and describe two types of corporation
• Explain the significance of stock to a corporation.
• Give examples of laws and regulations that affect how
corporations and other forms of businesses are formed and
operate.
CHAPTER 7
Biblical Integration:
• In order for a Christian entrepreneur to be
successful in God's eyes, they must be
diligent in all areas of their business.
CHAPTER 7
Forms of Business Ownership
• Sole proprietorship
• Partnership
• Corporation
p. 128
CHAPTER 7
pp. 129-131
Sole Proprietorship
• One owner
• Most popular form of business ownership
CHAPTER 7
pp. 129-131
Sole Proprietorship
• Advantages:
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freedom to enter and exit the market easily
freedom from outside control
freedom to retain information
freedom from paying excessive taxes
freedom from being an employee
CHAPTER 7
Sole Proprietorship
• Disadvantages:
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unlimited personal financial liability
limited management and employee skills
limited life
limited availability of money
pp. 129-131
CHAPTER 7
pp. 131-135
Partnership
• Business enterprise with two or more
owners
• Least popular form of business ownership
CHAPTER 7
Partnership
• Questions:
• Who are the partners?
• What is each partner responsible to do?
• How are profits to be divided?
pp. 131-135
CHAPTER 7
Partnership
• Questions:
• How may a partner withdraw from the
partnership?
• How can the partnership be dissolved?
pp. 131-135
CHAPTER 7
pp. 131-135
Partnership
• Advantages:
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greater management skills
greater retention of competent employees
greater sources of financing
ease of formation and freedom to manage
CHAPTER 7
Partnership
• Disadvantages:
• unlimited personal financial liability
• uncertain life
• conflicts between partners
pp. 131-135
CHAPTER 7
Partnership
• Limited partnerships
• at least one general partner
• unlimited personal financial liability
• makes most business decisions
pp. 131-135
CHAPTER 7
Partnership
• Limited partnerships
• at least one limited partner
• shares in profits
• no management responsibilities
• personal financial liability limited to the
amount of his investment
pp. 131-135
CHAPTER 7
pp. 131-135
Partnership
• Scripture and partnerships
• “unequal yoking”
• surety
• act of becoming security for or pledging to
undertake another’s debt
CHAPTER 7
pp. 135-140
Incorporation
• In a corporation, the business is its own
organization, independent of and separate
from the owners
• separate entity
CHAPTER 7
pp. 135-140
Incorporation
• Types of Corporations
• private corporations: owned by private citizens
• public corporations: owned by the general
public and managed by the government
• TVA, Amtrak
CHAPTER 7
Incorporation
• Ownership of a corporation
• buying shares of stock
pp. 135-140
CHAPTER 7
pp. 135-140
Incorporation
• Advantages
• limited personal financial liability of
stockholders
• experienced management and specialized
employees
CHAPTER 7
Incorporation
• Advantages
• continuous life
• ease in raising financial capital
pp. 135-140
CHAPTER 7
Incorporation
• Disadvantages
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higher taxes
greater governmental regulation
lack of secrecy
impersonality
rigidity
pp. 135-140
CHAPTER 7
Other Types
• S Corporation
• Limited Liability Company (LLC)
pp. 135-140
CHAPTER 7
pp. 135-140
S Corporation
• Profits and losses are not taxed at the corporate level
• Earnings are reported on the owner’s personal tax returns
in much the same way as sole proprietorships and
partnerships.
• Limited to one class of stock and shareholders are limited
in number and by U.S. residency.
• Limited liability
• Easier to raise capital and to transfer ownership
• No corporate taxes, but have regulations just like a
corporation.
BUSINESS ABBREVIATIONS
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Ltd. (Limited Liability)*
PC (Professional Corporation)*
LLC (limited liability Company)*
SA (Anonymous Society)*
p.l.c. (Publicly Limited Company)*
Inc. (Incorporation)*
* These abbreviations reflect the legal separation of
owners and the corporations.
• Corp. (Corporation)
• Co. (Company)
ACTIVITY 1
•
Break-up into groups of two or three.
•
Look over the list of companies and place
them into the correct category of business
types.
ACTIVITY 2
Using your textbook and lecture notes
complete the chart with your partner(s).
• Define the term, then list all of the
advantages and disadvantages for each
form of business.