2.01 Types of Business Ownership

Trisha Odum

Corporation

  • One or more shareholders (stockholders), who have one vote per share.
  • Managers, board of directors, and shareholders (stockholders).
  • Filing of an article of incorporation with state government.
  • One advantage is that Capital is easy to obtain. Another advantage is that Decision-making is shared.
  • One disadvantage is Double taxation of profits and earnings. Another disadvantage are government regulations.
  • It is a Limited Liability for Shareholders.
  • Bank of America Corporation.
  • Termination may have unlimited lifetime, if needed determined by charter or article of dissolution.
  • Sources of investment would be purchase of stocks.
  • Lowe's Home Improvement Store
  • Walmart

Partnership

  • Two or more people.
  • Determined by partnership agreement.
  • May be one or more partners.
  • Started with a partnership agreement. (varies by state.)
  • Two advantages would be more capital and credit available than a sole proprietorship. Shared management responsibilities.
  • Two disadvantages would be shared profits and you are responsible for each others decisions.
  • Unlimited Liability (depending on type).
  • An example would be Eden Limited Partnership.
  • Can be terminated by the actions of the partners, bankruptcy, death, and/or court order.
  • Source of investments would be personals of partners, gifts, borrowed and others may vary.
  • Sam's Club and Nokia.

Sole Proprietorship

  • One person.
  • Can be managed by the owner.
  • Begin buying and selling goods and services. This can vary by state.
  • Two advantages would be that it is easy to form and it only has a one time taxation.
  • Two disadvantages would be Limited capital and limited lifetime of owner.
  • Unlimited Liability.
  • Termination is determined by the decision or life of the owner.
  • Sources of Investment are Personal, gifts, or borrowed, and others may vary.

Limited Liability Partnership

  • Identifies some investors who cannot lose more than the amount of their investment. Investors are not allowed to participate in the day-to-day business management.

Cooperatives

  • Owned by members, serves their needs and is managed in their interest.
  • Purchase goods and services are cheaper as a group than as individuals.
  • Greater bargaining power than as individuals.

Franchise

  • Permission to operate a business to sell products and services in a set way.
  • Begins with a parent company who owns the product or service and grants the right to another business.
  • Franchiser: the company that owns the product.
  • Franchisee: the company purchasing the right to run the business.
  • Example: Burger King