Types of business ownerships

1. Types of business ownerships

2. Sole proprietorship • It is a business owned and operated by one person • The owner is responsible for all operations of the business and assumes all the risk (unlimited liability) • Borrowing money from the banks may be difficult because they usually require collateral when lending money

3. Sole proprietorships Advantages Disadvantages Owner is responsible for all debts Costs and time commitment can be high Funding can be difficult to obtain Owner is responsible for all aspects of the business Owner doesn’t have fringe benefits • Owner makes all decisions and is his or her own boss • Owner keeps all the profits • All financial information can be kept secret • This type of business is easy to start or close

4. Partnership • A form of business organization in which two or more people own and operate it • The partners have a partnership agreement drafted by a lawyer • Name and location of business • Purpose of business • Each partner’s investment • Structure for dividing profits/losses • Duties for each partner • Procedure for ending partnership

5. partnership Advantages Disadvantages Partners have unlimited personal liability for all the other partners May have conflicts Profits are shared Partnerships are more difficult to close down than sole proprietorships • Partners co-own the business • They share responsibilities • They may have greater financial resources than a sole proprietor • They share business losses • They share time commitment

6. corporation • Legal entity that exists independently of its owners (shareholders) • Same right and obligations as a natural person • Shareholders: people who buy shares in a company, they become part owners of it • Shareholders elect a Board of Directors who direct the overall direction of the corporation – they hire Officers (presidents, CEOs, etc.) to decide on objectives for the company – they hire Managers who supervise the employees • Corporations can be either private, public, crown or non-profit

7. corporation Advantages Disadvantages More complicated structures than the other two Value of company shares can change depending on changes in the stock market • Limited liability • Shareholders do not operate the company • Raise funds easier than sole proprietorships and partnerships • Have a lower tax rate than the other two • Exist after the death of the owner

8. Co-operatives • Owned and operated by a group of people with a strong common interest • Stat-up costs are shared among the members of the co-op • Members own and control the business and make all business decisions • Profits are divided up by the amount of business the person does with the co-op

9. Co-operatives Advantages Disadvantages Each member has the same amount of control over the co-op not depending on investment Commitment varies with the amount of money a member has invested Decision making becomes harder as the number of members increase • Limited risk • Everyone gets 1 vote • Buy in bulk (savings)

10. franchise • Already established good for being known • Rights to use the business name and sell product

11. franchise Advantages Disadvantages Hire by himself Not as much freedom Costs a lot Lack of control • Locations and famous companies cost more • Given support • Get a cut of the action • Agreement in a contract • Provides packaging, etc., and ads