Title: Chapter 2: Types of Businesses Forms of Business Ownership
1Chapter 2 Types of BusinessesForms of Business
Ownership
- Forms of business ownership and types of
businesses describe how they are organized and
run. The four main forms of business ownership
are listed below. -
- Sole Proprietorships
- A sole proprietorship is a business owned by one
person who is known as the proprietor. The
proprietor has a wide range of responsibilities
including arranging displays and selling to
customers to name a few. Funds to run the
business usually come from the owners savings,
friends, family, or from a bank loan. If the
business prospers, the owner receives all of the
profits. If the business does poorly, the owner
is responsible for its losses. This is called
unlimited liability.
? A franchise is a combination, or hybrid, of the
four forms of ownership.
- partnership
- co-operatives
- sole proprietorship
- corporation
2Chapter 2 Types of BusinessesForms of Business
Ownership
- Partnerships
- A partnership refers to a type of business in
which two or more - individuals share the costs and responsibilities
of owning and - operating it.
- The terms of the partnership are recorded in the
partnership - agreement. The most common form of partnership is
a general - partnership. When two individuals form a limited
partnership, the - partners are only responsible for the funds they
both invested in the initial business. This is
called limited liability.
3Chapter 2 Types of BusinessesForms of Business
Ownership
- Corporations
- A corporation is a business granted legal status
with rights, privileges, and - liabilities that are distinct from those of the
people who work for the business. - Corporations can be small such as a one-person
business or large such as - A multinational that conducts business in several
different countries. - Small portions of corporate ownership that are
owned publicly are called - stocks or shares. Individuals who own shares of a
- corporation are called shareholders and become
- owners of the business. Shareholders have
- limited liability. A board of directors runs
- a corporation that is owned by shareholders.
- A publicly traded corporation that makes a profit
may pay out dividends to shareholders.
4Chapter 2 Types of BusinessesForms of Business
Ownership
- Types of Corporations
- Co-operatives
- A co-operative is owned by the workers or members
who buy the - products or use the services that the business
offers. This type of - business is motivated by service and not profit.
Adaptations of this - business model include consumer, retail, and
worker - co-operatives.
- private corporations
- Crown corporations
- public corporations
- municipal corporations
5Chapter 2 Types of BusinessesForms of Business
Ownership
- Franchises
- The franchiser licenses the rights to its name,
operating procedure, designs, and business
expertise to another business called the
franchisee. - A franchise agreement can provide the franchisee
with - a ready made, fully operational business
- brand recognition that is appealing to consumers
- Requirements before a franchise is awarded may
include - paying the franchise fee
- agreeing to pay a monthly percentage fee as well
as any national or local advertising costs - purchasing all supplies centrally from the
franchiser - participating in franchiser standards training
6Chapter 2 Types of BusinessesGoing into Business
- Eight Questions to Ask Before Going into Business
- Why Start Your Own Business?
- People who desire to be the boss and take
responsibility for making decisions often decide
to run their own business. They - believe it is the best way for them to achieve
financial independence, to allow them to use
their skills and knowledge, and to be creative. - What Different Types of Businesses Are There?
- service business retail business
- not-for-profit organization manufacturing
business - What Are Your Skills and Interests?
- Different ideas, skills, and knowledge can be
used to start a new business. Two popular ones
are home-based or Web-based businesses.
7Chapter 2 Types of BusinessesGoing into Business
- Should Your Business Be Home-based?
- Technology has changed how SOHO (small office,
home-based) businesses operate. Computers,
scanners, and Internet access are a few of the
tools that home office businesses use today to be
successful. - ii. Should Your Business be Web-based?
- E-commerce (electronic commerce) is a
marketplace where consumers and sellers meet
without face-to-face contact. In the real
world, products are tangible. Products and
services are sold to us by personal contact with
the sellers. In cyberspace or online, we do not
interact with products or come face-to-face with
the sellers. Our experience with services is
limited or non-existent. Consumers are often
reluctant to purchase online due to unreliable or
dishonest businesses and privacy issues.
8Chapter 2 Types of BusinessesGoing into Business
- Where Can You Find Information About a Business?
- Businesses require accurate and current
information to make good decisions. Important
resources to find information include - What Are the Start-up Costs?
- Capital resources to run a business are
available through - debt financing referred to as borrowing money to
run the business. Using your savings or investor
savings called - equity financing is an alternative way to fund a
business. -
-
libraries trade associations the
Internet existing businesses federal and
provincial governments (i.e., Strategis and
Statistics Canada are two helpful government
sites or agencies.)
9Chapter 2 Types of BusinessesGoing into Business
- What Level of Risk Can You Expect?
- Even with research and planning, business can be
risky. Risks or threats beyond and within the
owners control can put the business in financial
difficulty. - What Steps Are Involved in Running This Business?
- Some types of businesses, such as manufacturing,
are complex. A complex business requires many
people with different skills to successfully
start and operate it.
10Chapter 2 Types of BusinessesGoing into Business
- What Resources Will You Need?
- Forecasting is determining the resources the
business requires and how much financing it needs
to obtain them. - Revenue is the amount of money gained from the
sale of products or services.
11Chapter 2 Types of BusinessesInternational
Business Structures
- A number of different business structures allow
businesses to expand into international markets. - Joint Ventures
- A joint venture can match the skills and
expertise of two different individuals or
businesses to generate more benefits for both
parties. - International Franchises
- An international franchise is a way to achieve an
international presence by buying the rights to a
chain operation from the franchiser.
12Chapter 2 Types of BusinessesForms of Business
Ownership
- Strategic Alliances
- Strategic alliances occur when two or more
businesses agree to commit particular resources
to achieve a common set of objectives. Alliance
partners remain separate and entirely independent
of each other. - Mergers
- Mergers happen when two or more companies join
together one of the businesses usually wants to
purchase a controlling interest in the other
company, or both business have combined interests.
13Chapter 2 Types of BusinessesForms of Business
Ownership
- Offshoring
- Offshoring relocates some of a companys
operations to another - country. Usually this happens to take advantage
of lower labour costs, to - be closer to large and emerging buyer markets,
and to have access to skilled workforces. - Multinational Corporations
- A business enterprise that conducts business in
another country or - several different countries is a multinational
corporation. A - multinational corporation offers different
benefits to the country it invests - in. Some positive benefits include new jobs and
training for people. - Negative consequences could be less pay and more
financial instability for citizens of that
country.