Chapter 6 Business Ownership And Operations. Types of Business Ownership The three different ways you can own a business are: Sole proprietorship Partnership.
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Slide 1
Chapter 6 Business Ownership And Operations
Slide 2
Types of Business Ownership The three different ways you can
own a business are: Sole proprietorship Partnership
Incorporation
Slide 3
Sole Proprietorship A sole proprietorship is a business owned
by only one person. The advantages to having your own business are:
Its easy to start You get to be your own boss You get to keep all
the profits The taxes are usually low
Slide 4
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
Slide 5
Sole Proprietorship A serious disadvantage to owning a sole
proprietorship is that you have unlimited liability, or full
responsibility for your companys debts. If you lose more money then
you make, you have to make up the difference You could lose your
personal savings, your property, and even your car if the business
cannot repay debts
Slide 6
Partnership A partnership is a business owned by two or more
persons who share the risks and rewards. 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.
Slide 7
Partnership The advantages to partnership are: You might need
only a license to start and have to pay taxes only on your personal
profits. Each of your partners can contribute money to start the
business. Banks are often more willing to lend money to
partnerships than sole proprietorships. Your partners can bring
different skills to the business.
Slide 8
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.
Slide 9
Corporation Suppose your car repair business has grown and you
want to add more shops, or buy new equipment. You need more money
or bring in new partners What you can do is form a corporation A
corporation is a business owned by many people but treated by law
as one person.
Slide 10
Corporation A corporation can own property, pay taxes, it exits
separate from its owners To form a corporation, you need to get a
corporate charter from the state your headquarters is in. This
charter is a license to run a corporation To raise money, you can
sell stock, or shares of ownership in your corporation.
Slide 11
Corporation The new owners (stock holder) pay a set price for
each share. 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 You also must have a board of directors who control
the corporation. They dont run the day to day business operations
of the company, but they hire officers to do it. Each yeah the
stockholders vote on the board members
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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. Another advantage is that the corporation
doesnt end if the owners sell their shares. As long as your
business makes money you can continue the company by reselling the
shares
Slide 14
Corporation A disadvantage of a corporation is that you often
have to pay more taxes. Double taxation 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.
Slide 15
Alternative Ways to do Business You might find it easier to
start a business with the help of an established company
Franchises, Cooperatives, and Nonprofit Organizations offer you
other ways to do business
Slide 16
Franchise A franchise is a contractual agreement to sell a
companys products or services in a designated geographic area. We
have several franchises in Delphi Exp: Arbys, Pizza Hut, DQ,
Monicals. Pizza King, Blockbuster If you decided to open a Pizza
Hut then you are the franchisee and Pizza Hut is the
franchisor
Slide 17
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 well-known name and a business plan. It
provides management training, advertising, and system of
operation
Slide 18
Franchise You can operate a franchise yourself, as a sole
proprietor, as a partnership with someone else, or even as a
corporation. 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.
Slide 19
Nonprofit Organization Not everyone goes into business just to
make a profit You might want to start a business whose main purpose
is to help children, the poor, local artist, or animals A nonprofit
organization is a type of business that focuses on providing a
service rather than making a profit.
Slide 20
Nonprofit Organization The American Red Cross and Meals on
Wheels are nonprofit organizations Like a corporation, a nonprofit
organization has to register with the government and might be run
by a board of directors. Because it doesnt make a profit, a
nonprofit organization doesnt have to pay taxes.
Slide 21
Nonprofit Organization Instead of investors, nonprofit
organizations rely on government grants, and donations from
individual businesses. Donors dont receive dividends like
investors, but they can deduct their donations from their
taxes.
Slide 22
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.. For example Ocean Spray is a
cooperative of cranberry growers A cooperative is like a
corporation in that it exists as a separate entity from the
individual businesses.
Slide 23
Cooperative You also need a government charter to start one A
cooperative can sell stock and choose a board of directors to run
it. With a cooperative small farmers, book dealers can pool their
resources, and save money by buying insurance, supplies or
advertising as a group Cooperatives pay less in taxes than regular
corporations do.
Slide 24
Types of Businesses There are many different types of
businesses and different ways to classify them One way to classify
businesses 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
Slide 25
Producers A producer is a business that gathers raw products in
their natural state. Raw goods are materials gathered in their
original state from natural resources such as land and water.
Farmers who grow wheat, or corn are producers So is a miner who
digs for ore in Minnesota Industries that are producers include
agricultural, mining, fishing, and forestry
Slide 26
Processors Most of the time we do not use raw goods in the same
form they where found in Processors change raw materials into more
finished products. Processed goods are made from raw goods and may
require further processing. For example wheat is turned into flour,
crude oil into gasoline, iron into steel Paper Mills, Oil
refineries, and smelting plants are types of processors
Slide 27
Manufactures Manufacturers are businesses that make finished
products out of processed goods. They turn raw or processed goods
into finished goods that require no further processing and ready
for the market Pepsi Co., Boeing, G.E., are types of
manufacters
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Intermediaries An intermediary is a business that moves goods
from one business to another. It buys goods, stores them, and then
resells them. A wholesaler, also known as a distributor,
distributes goods. Wholesalers buy goods from manufacturers in huge
quantities and resell them in smaller quantities to their
customers, usually other companies.
Slide 29
Intermediaries A retailer purchases goods from a wholesaler and
resells them to the consumer, or the final buyer of the goods.
Service stations, record stores, and auto dealers are types of
retailers
Slide 30
Service Business Service businesses provide services rather
than goods. Services are the products of a skill or an activity,
such as hairstyling and car repair. Some service businesses meet
needs, like medical clinics, and law firms Others provide
conveniences such as taxies, copy shops