2.01 Types of Business Ownership

-By: Sarah Shook-Date: 2/17-POBF-3rd-

Cooperatives

  • Owned by members
  • Purchase goods and services at a cheaper rate
  • Greater buying power

Specialized Partnerships and Corporations

  • Treat partners as individuals only taxing them once
  • Limited liability for owners
  • Non-profit corporation

Franchise

  • Permission to operate a business to sell products and services in a set way
  • Begins with a parent company who owns the product
  • Ex- Mcdonalds, Burger King, Cookout....etc.

Corporation

  • Owned by one or more shareholder
  • Managed by a board of directors
  • A corporation is started by the Articles of Incorporation
  • Ownership is determined by purchase of stock
  • A stock holder owns a piece of the company
Advantages


  • Easier to obtain capital
  • Limited liability for shareholders
  • Life of the corporation is unlimited
Disadvantages



  • Double taxation
  • Increased government regulations and legal restrictions
  • Decision making shared among managers, board of directors, and share holders
Sources of Investment

  • Purchase of stock

Partnership

  • Owned and controlled by 2 or more people who have entered into a written agreement
  • Management of the company depends on the partnership agreement
  • Ownership is determined by the partners in the written agreement
  • Limited Liability Partnership- Identifies some investors who cannot lose more than the amount of there investment. This kind of partnership does not allow them to participate in the day-to-day business management
  • Dormant Partnership- Plays no role and is not known to the public
  • General Partnership- Plays an active role and has unlimited liability
  • Limited Partnership- Participate as investors and have limited liability
  • Secret Partnership- Plays an active role but is secret from society
  • Silent Partnership- Does not have an active role but is known to the public
Advantages
  • More capital and credit available than a sole proprietorship
  • Combined resources
  • Shared management and risks
Disadvantages
  • Shared profits
  • Responsible for each others decisions
  • Potential for disagreements
  • Unlimited liability (depending on type)
Sources of Investment

  • Personals of partners, gifts borrowed and others may vary

Sole Proprietorship

  • One owner
  • The manager may be the owner. Owner participates in all day-to-day operations
  • Business is started by beginning to buy and sell goods or services
  • Whoever starts the business owns it
Advantages

  • Easy to form
  • Complete control of business
  • Receives 100% of profit
Disadvantages

  • Limited capital
  • Unlimited liability
  • Limited lifetime of owner
Sources of Investment

  • Personal, gifts borrowed, and others may vary