Download Sole Proprietorship - Northern Highlands

Chapter
6
Types of Business Ownership
The three different ways you can own
a business are:
• Sole proprietorship
• Partnership
• Incorporation
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Chapter
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Sole Proprietorship
A sole proprietorship is a business
owned by only one person.
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6
Sole Proprietorship
The advantages to having your own
business are:
• It’s easy to start
• You get to be your own boss
• You get to keep all the profits
• The taxes are usually low
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Chapter
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Sole Proprietorship
The disadvantages to having your own
business are:
• You have to pay for everything yourself
• You might have to use your personal savings or
•
borrow money from the bank
You might lack business skills
continued
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Chapter
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Sole Proprietorship
A serious disadvantage to owning a
sole proprietorship is that you have
unlimited liability, or full responsibility
for your company’s debts.
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Chapter
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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
• Banks are often more willing to lend
•
money to partnerships than sole
proprietorships.
Your partners can bring different
skills to the business.
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Chapter
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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
continued
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6
Similarities and Differences Between
Graphic Organizer
Chapter
Partnerships and Sole Proprietorships
Both
Partnerships
Sole Proprietorships
Quicker
decision
Pride in
making
owning and
running business
Owner keeps
Increased
Easy to set up
all profits
diversity of
Low taxes
experience
Owner is
Unlimited liability
own boss
for debts
Shared losses
Relatively easy
Huge time
Combined
demands
to get credit
funds
Shared
decision
making
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Corporation
A corporation is a business owned by
many people but treated by law as one
person.
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Corporation
To raise money, you can sell stock, or
shares of ownership in your
corporation.
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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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Chapter
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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.
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Corporation
Another advantage is that the
corporation doesn’t 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.
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Alternative Ways to Do Business
Franchises, and nonprofit
organizations offer you other ways to
do business.
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Franchise
A franchise is a contractual
agreement to sell a company’s
products or services in a designated
geographic area.
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Franchise
To run 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 wellknown name and a business plan.
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Franchise
You can operate a franchise yourself,
as a sole proprietor, as a partnership
with someone else, or even as a
corporation.
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Franchise
An advantage of opening a franchise
is that it’s easy to start.
The name of the parent company can
be a big draw for customers.
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Chapter
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Franchise
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.
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Nonprofit Organization
Like a corporation, a nonprofit
organization has to register with the
government and might be run by a
board of directors.
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Nonprofit Organization
Because it doesn’t make a profit, a
nonprofit organization doesn’t have to
pay taxes.
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Nonprofit Organization
Donors don’t receive dividends like
investors, but they can deduct their
donations from their taxes.
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