By: Evan Stern
9th Grade
Introduction to Business
You will:
• Describe the three types of business organizations in a
market economy
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Compare the advantages and disadvantages of each of the
three types of business organization in a market economy
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Student will be able to understand how a business is
created and which type of business organization is best for
each potential business
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These are the directions on how to navigate through my
presentation
You will navigate forward and backward through each slide
by clicking on the following arrows:
(backward)
(forward)
You can click on the menu button and it will take you back
to the table of contents page,
(menu logo)
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Sole Proprietorship
Partnership
Corporation
Quiz
Summary
Homework
• Sole proprietorship is defined as: a form of business
organization that is owned and managed by one individual
who assumes all risk of loss and receives all profits
Advantages of Sole-Proprietorship:
1. Low start-up costs
2. Greatest freedom
3. All profits to owner
4. Owner in direct control
Disadvantages of Sole-Proprietorship:
1. Unlimited liability
2. Lack of continuity
3. Difficulty in raising capital
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Examples: Corner Grocery
Store, Mom and Pop Shop
Oldest, most common, and
simplest form of creating a
business
Because they are an entity
(distinct, separate
existence), a person can
never be separated from
their business.
Not a good option if you
have aspirations of starting
a huge business (such as
Wal-Mart or Target)
• A form of business organization that is owned
by two or more individuals who assume all risk
of loss and receive all profit.
Advantages of a Partnership:
1. Easy to form
2. Low start up costs
3. Divided authority
Disadvantages of a Partnership:
1. Unlimited Liability
2. Lack of continuity
3. Divided authority
4. Difficulty in finding suitable partner
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Examples: Lawyer Firm,
Doctors Office, Barbershop
Named after the last name of
the partners (Brown &
Croupen Law Firm is an
example)
Its important to decide how
assets are divided if you and
your partner stop doing
business. If this is not
established, it could turn into
a disaster.
Main point: Be in business
with someone you trust!
• A form of business organization that is created by law,
functions as a separate legal entity, and is owned by
two or more individuals called stockholders.
Stockholders are at risk only for the amount of their
financial investment.
Advantages of a Corporation:
1. Limited liability
2. Specialized management
3. Ease of raising capital
Disadvantages of a Corporation:
1. Close regulation
2. Most expensive to organize
3. Extensive record-keeping
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Examples: McDonalds,
IBM, Walmart
Rights of Stockholders in
Corporations: Declared
dividends, voting at
meetings on major issues,
selling/buying shares, right
to transfer ownership
Stockholders are the last
people to get a
corporation’s assets.
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Must choose directors for your corporation
Write a corporation’s by laws
Create and sign your articles of corporation
Create a shareholders agreement
Open a bank account
Hold a board of directors meeting and assign a secretary to
take minutes at the meetings
Obtain business licenses and permits
Issue certificates to your corporation’s initial stockholders
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The following three slides are 3 quiz questions that cover
everything we just learned.
If you read all of the content, you should do great on the
quiz!
After the quiz, you will be assigned your homework which I
need by next class, when we will begin our project.
ENJOY!
What are the advantages of a partnership?
A. Lack of continuity, Unlimited liability, Difficulty in finding
suitable partner
B. Easy to form, Low start-up costs, Divided authority
C. Limited liability, Specialized management, Ease of raising
capital
D. Owner in direct control, greatest freedom, all profits to
owner
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INCORRECT!
These are the disadvantages of a partnership. Being liable for
all parts of a business and having trouble finding a partner
would not be considered advantages.
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CORRECT!
Partnerships are easy to form, have low-start up costs, and
allow you to divide authority with your co-partner. These three
advantages make a partnership a popular business
organization.
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INCORRECT!
These are the advantages of a corporation. A partnership has
unlimited liability, not limited. A corporation also has
stockholders and functions as a separate legal entity.
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INCORRECT!
These are the advantages of a sole-proprietorship. A soleproprietorship has low-start up costs like a partnership, but it
is different because there is one owner. The owner is in direct
control and receives all of the profits.
Which of the following is not a right of stockholders?
A. Declared dividends
B. Voting on certain company matters
C. Being one of the first people to receive a portion of the
company’s assets
D. Selling their shares
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INCORRECT!
This is a right of stockholders. They are able to receive
dividends if their company is making a profit.
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INCORRECT!
This is a right of stockholders. They are able to attend all
company meetings and vote on matters that affect the
company. A corporation needs its stockholders to be happy
and this is a way for them to contribute to the company,
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CORRECT!
As a stockholder, you are not one of the first people to receive
some of the company’s assets. You are actually at the very
bottom of the corporate chain. The creditors get the
company’s assets first, then the bondholders, then the
preferred stockholders, and then finally the common
stockholders.
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INCORRECT!
Stockholders are allowed to sell their shares and buy more
shares at any time. This usually happens when a company is
doing poorly or when they are on the rise.
Why would a person NOT want to start a soleproprietorship?
A. Unlimited Liability
B. No formal requirements
C. Low start up-costs
D. Decision making in direct hands of owner
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CORRECT!
A person would not want to start a sole-proprietorship due to
unlimited liability. Unlimited liability means the owner’s
personal assets can be taken away.
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INCORRECT!
Having no formal requirements makes it easy to start a
business. Business owners like the fact that it does not
require a lot of time and effort to get started.
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INCORRECT!
Potential business owners like the fact that start up costs are
low. Some business owners create a sole-proprietorship
organization on the side of another business, since costs are
so low.
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INCORRECT!
Certain business owners like not having a boss and they like
being able to make all of the decisions on their own. Business
owners who do not like receiving orders favor soleproprietorships.
For an additional summary of what we learned today, visit the following
two websites. These web sites will help you understand what we
learned and will further expand your learning .
• http://www.businessfinance.com/books/startabusiness/StartABusi
nessWorkbook010.htm
This web site talks about all three types of business organizations we
discussed and the advantages and disadvantages of them. This is a
good summary.
 http://www.poznaklaw.com/articles/solep.htm
This web site focuses on sole-proprietorship, but it goes into more
detail than what we discussed. This is a good source for your project if
you decide to create a sole-proprietorship as your business.
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Based on the skills already learned, we will start a project.
In this project, we will split up into groups and you will have
to pick out the best business for you based on clues.
The first step for your project is a group interview. Everyone
must fill one out.
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Business Education
Competencies:
Introduction to
Business: D)
Investigate Business
Operations
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Compare and contrast
the different types of
business ownership
(SS4, 1.10)
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My presentation is on how to create a business and the
three different types of business ownership. This is exactly
what SS4 says is a learning objective of Introduction
Business.
My presentation is good for diverse learners because you
can go through the presentation at your own pace and still
be able to complete it effectively.
Now, we will begin working on a project. Each student will
start a business and decide on their own what they want
the business to be and what type of business organization
they will start.
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Staff, Investopedia. (2010, Janurary 02). Knowing your
rights as a shareholder. Retrieved from
http://www.investopedia.com/articles/01/050201.asp
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Schultz, Matt. (n.d.). Sole proprietorship. Retrieved from
http://www.sos.state.ia.us/business/sole.html