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Chapter 5.2
Forms of Business Ownership
2012
Business Ownership
“You don’t have to worry about burning bridges, if you’re
building your own” – Kerry E. Wagner
What are 2 advantages and 2
disadvantages of owning your
own business?
Three Types of
Business Ownerships
Difference: the level of financial risk involved
Proprietorship
Partnership
Corporation
Choosing a Proprietorship
Advantages:
•The simplest structure
•Involves one person who owns & operates the business
•If you intend to work alone = best option
•Tax advantages
– Income tax is taxed as part of your personal income
Disadvantages:
•Personally responsible for your company’s liabilities
– Place assets at risk which can be seized to satisfy a business debt or a
legal claim filed against you
•Raising money
•Dependence on financial services
– Savings, home equity or family loans
Choosing a Partnership
Advantages:
• Owned and operated by several individuals
– Two or more people can contribute to the investment needed to
start the business
• A partnership agreement
• A good ownership form for people who share an idea for a business
Disadvantages:
• Can be formed by a verbal agreement
• No protection for the personal assets of an partner
…Round Table…
Effective partners often compliment each
other in that one offers skills and abilities the
other does not possess.
What skills would you look for in a partner
that would be beneficial for your business’s
success?
Choosing a Corporation
Advantages:
• The liability of any owner is limited to the amount of money invested
• The amount of debt of the business does not matter
– Personal assets are not at risk
• People can invest in the business and receive some of the profit without having to
take part in the day-to-day management and operations
• The business can be easily expanded and ownership can be changed by the sale of
stock
Disadvantages:
• Complex and expensive
• Decision-making is shared among managers, the board of directors, and
shareholders
• More records and regulation laws applied
• Payment of corporate taxes on profits earned
– Investors also pay taxes on their individual earnings from the business
Other Forms of Ownership
• Specialized Partnerships and Corporations
– Limited Liability Partnership
– Joint Venture
– S-corporation
– Limited Liability Company
– Nonprofit Corporation
Other Forms of Ownership
Continued….
• Cooperatives and Franchises
– Cooperative
– Franchise
• Franchiser
• Franchisee
Share the info…
Answer & hand in before leaving please
1.
The form of ownership that gives one person sole control over all business
decisions is the _____________
a. Proprietorship
b. Partnership
c. Corporation
d. Franchise
2. True or False
All investors in a general partnership have full liability for the debts of the business.
A. Proprietorship
True
3. The people who make the major policy and financial decisions in a
corporation are the ____________
a. Investors
b. Board of directors
c. Managers
d. Owners
4. A special form of business organization that combines advantages of a corporation and a partnership is a ____
a. Franchise
b. Nonprofit corporation
c. Cooperative
d. Limited liability company
B. Board of Directors
D. Limited Liability
Company