Types of Business Ownership

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Types of Business Ownership
The three different ways you can own a business
are

• Sole proprietorship
• Partnership
• Corporation

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Sole Proprietorship

• A sole proprietorship is a business owned by only
  one person.
• Easy to start may only need a license or permit.
  Ex- DBA(Doing Business As) from county court
  house.
• About ¾ of all businesses

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Sole Proprietorship
The advantages

• Its easy to start
• You get to be your own boss/make all decisions.
• You get to keep all the profits
• The taxes are usually low and paid by owner

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Sole Proprietorship
The disadvantages

• You have unlimited liability
• You have to pay for everything yourself
• Hard to get start up financing usually from self,
  family/friends or bank.
• Life of business limited to interest and
  participation of owner

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Partnership
A partnership is a business owned by two or more
persons who share the risks and rewards.
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Partnership
To start a partnership you need to draw up a
partnership agreement, which is a contract that
outlines the rights and responsibilities of each
partner and a business liscence.
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Partnership
The advantages to partnership are

• Each of your partners can contribute money to
  start the business.
• You might need only a license to start and have
  to pay taxes only on your personal profits.

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Partnership

• Banks are often more willing to lend money to
  partnerships than sole proprietorships.
• Your partners can bring different skills to the
  business. Example- 1 person good with computers,
  1 person good with finances, 1 is creative.

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Partnership
The disadvantages to partnership are

• You not only share the risks with your partners,
  you also share the profits.
• You might not get along with your partners.
• You share unlimited legal and financial liability
  with your partners

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Corporation

• A corporation is a business owned by many people
  but treated by law as one person.
• To start a corporation, you need to get a
  corporate charter from the state your
  headquarters is in
• Gather stakeholders

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Corporation

• To raise money, you can sell stock, or shares of
  ownership in your corporation.
• For each share of common stock, the stockholder
  gets a share of the profits and a vote on how the
  business is run.
• You also must have a board of directors who
  control the corporation.

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Corporation

• A major advantage of a corporation is its limited
  liability.

• If your company loses money, the stockholders
  lose only what they invested.
• Also the corporation doesnt end if the owners
  sell their shares

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Corporation

• A disadvantage of a corporation is that you often
  have to pay more taxes. (Income and corporate)
• Also The government closely regulates
  corporations.
• It is more difficult to start a corporation than
  a sole proprietorship or a partnership and
  running a corporation can be much more
  complicated.

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Alternative Ways to Do Business
Franchises, cooperatives, and nonprofit
organizations offer you other ways to do
business.
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Franchise
A franchise is a contractual agreement to sell a
companys products or services in a designated
geographic area. Examples McDonald Taco Bell,
and KFC, and Pizza Hut To run/start a franchise
you have to invest money and pay the franchisor
an annual fee or a share of the profits In
return, the franchisor offers a well-known name
and a business plan.
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Franchise
An advantage of opening a franchise is that its
easy to start.
The name of the parent company can be a big draw
for customers.
The disadvantage of running a franchise is that
the franchisor is often very strict about how the
business is run.
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Nonprofit Organization
A nonprofit organization is a type of business
that focuses on providing a service rather than
making a profit. Like a corporation, a nonprofit
organization has to register with the government
and might be run by a board of directors.
Example-Local Churches, Red Cross and Meals on
Wheels
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Nonprofit Organization
Because it doesnt make a profit, a nonprofit
organization doesnt have to pay taxes. Tax
Exempt
Donors dont receive dividends like investors,
but they can deduct their donations from their
taxes.Tax deduction
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Cooperative
A cooperative is an organization owned and
operated by its members for the purpose of saving
money on the purchase of certain goods and
services. It exists as a separate entity from the
individual businesses. Example Ocean Spray,
Welchs, and Ace Hardware
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Cooperative
A cooperative can sell stock and choose a board
of directors to run it.
Cooperatives pay less in taxes than regular
corporations do.
Cooperatives can save money by buying insurance,
supplies, advertising as a group.
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Types of
Business

• 3 Main Types/Classifications
• Retail-A business that sell items.
• Ex. Grocery Store, Clothing Store, Auto Dealers,
  and Gas Station
• Service-provide a task by person or machine to
• Ex. Auto Repair, Doctors Office, Fast Food
  Restaurant, and Bank
• Manufacturing-create or produce goods
• Ex-Oil and Gas Drilling Company, Farming
  Business, and Automotive Factory

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Types of Businesses
Before a products is provided to consumers is
goes different cycles or businesses that could
include processors, manufactures, refineries, and
transporters. One way to classify is to group
them by the kind of products they provide

• Producing raw goods
• Processing raw goods
• Manufacturing goods from raw or processed goods
• Distributing goods
• Providing services

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