Business Ownership and Operations

1. Business Ownership and Operations Chapter 6 Take a note sheet on your way in. Make sure you are in your assigned seats or you will be marked absent.

2. Types of Business Ownership • Sole Proprietorship • Partnership • Corporation

3. Sole Proprietorship A business owned by only one person Sole Proprietorship examples include small businesses, such as a single person art studio, a local grocery, or an IT consultation service. The moment you start offering goods and services to others, you form a Sole Proprietorship. It's that simple.

4. Sole Proprietorship - Advantages • Easiest and least expensive form of ownership to organize • Sole proprietors are in complete control and may make decisions as they see fit • Sole proprietors receive all income generated by the business to keep or reinvest • Profits from the business flow-through directly to the owner’s personal tax return (Schedule C) • The business is easy to dissolve, if desired

5. Sole Proprietorship - Disadvantages • Sole proprietors have unlimited liabilityand are legally responsible for all debts against the business • Their business and personal assets are at risk • May be at a disadvantage in raising funds and are often limited to using funds from personal savings or consumer loans • The life of the business ends when the sole proprietor dies

6. Partnership A business owned by two or more persons who share the risks and the rewards • GoPro & Red Bull • Pottery Barn & Sherwin-Williams • Casper & West Elm • Bonne Belle & Dr. Pepper • BMW & Louis Vuitton • Uber & Spotify • Apple & MasterCard • Airbnb & Flipboard • BuzzFeed & Best Friends Animal Society • Alexander Wang & H&M • CoverGirl & Lucasfilm • UNICEF & Target • Nike & Apple

7. Partnerships Continued • https://www.businessinsider.com/10-successful-cofounders-and-why-their-partnerships-worked

8. Partnership - Advantages • Relatively easy to establish • Time should be invested in developing the partnership agreement • With more than one owner, the ability to raise funds may be increased • The profits from the business flow directly through to the partners’ personal tax returns • The business usually will benefit from partners who have complimentary skills

9. Partnerships - Disadvantages • Partners are jointly and individually liable for the actions of the other partners • Profits must be shared with others • Since decisions are shared, disagreements can occur • The partnership may have a limited life, it may end upon the withdrawal or death of a partner

10. Corporation A business owned by many people but treated by law as one person The corporation can own property, pay taxes, make contracts, and be sued just like a person The owners of a corporation are its shareholders

11. Corporations continued Shareholders are individuals who have bought stockin the company Shareholders elect a board of directors to oversee the major policies and decisions The corporation has a life of its own and does not dissolve when ownership changes

12. Corporations - Advantages • Shareholders (the owners of the corporation) have limited liability for the corporation’s debts or judgments against the corporation • The most they can lose is their investment in the corporation • Shareholders receive a share of the corporation’s profits through dividends • Corporations can raise additional funds through the sale of stock.

13. Corporations - Disadvantages • The process of incorporation requires more time and money than other forms of organization • Corporations are monitored by federal, state, and some local agencies, and as a result may have more paperwork to comply with regulations • Incorporating may result in higher overall taxes • Corporate income is taxed • Dividends are taxed • A business license is a contractual agreement to sell a company’s products or services in a designated geographical area.

14. Corporation Examples • The Most Successful Corporations In The U.S. • J.P. Morgan Chase & Co • Walt Disney Company • Deere and Co • Johnson & Johnson  • Amazon.com

15. Alternative Ways to Do Business • Franchise • Nonprofit Organization • Cooperative

16. Franchise • Contractual agreement to sell a company’s products or services in a designated geographic area • 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 a system of operation

17. Examples of Franchises • Great Clips • McDonald’s • Sonic • Re/Max • Subway • Days Inn • Taco Bell • Jimmy Johns • Dunkin Donuts

18. Franchise - Advantages • Easy to start • You can rely on the proven methods and product of the parent company • The name of the parent company can be a big draw for customers

19. Franchise - Disadvantages • The franchisor is often very strict about how the business is to run • Your business must operate like every other franchise • You might be limited in what products or services you can offer customers • https://www.franchiseopportunities.com/find-a-franchise/state/illinois

20. Nonprofit Organization • A type of business that focuses on providing a service rather than making a profit • The largest non-profit organization in the United States is the Bill and Melinda Gates Foundation, which has an endowment of approximately $27 billion.

21. Cooperative • An organization owned and operated by its members for the purpose of saving money on the purchase of goods and services • Ocean Spray is a cooperative of cranberry growers

22. Types of Businesses • Producers • Processors • Manufacturers • Intermediaries • Service

23. Producer • A business that gathers raw products in their natural state • A farmer who grows wheat in Kansas is a producer • Industries that are producers include agriculture, mining, fishing, and forestry

24. Processors • Change raw materials into more finished products. • Wheat turned into flour • Crude oil into gasoline • Iron ore into steel • Paper mills and oil refineries are types of businesses that process raw goods.

25. Manufacturers • Businesses that make finished products out of processed goods • A bakery makes bread out of flour • A furniture factory makes tables out of lumber • An automotive plant makes cars out of steel, glass, and plastic

26. Intermediaries • A business that moves goods from one business to another • Wholesaler: buys goods from manufacturers in huge quantities and resells them in smaller quantities to their customers, usually other companies • Retailer: purchases goods from wholesalers and resells them to the consumer, or the final buyer of the goods

27. Service • Businesses that provide services rather than goods • Some examples are companies with the following business activity: • financial, insurance, real estate, hotels, restaurants, coffee shops, food courts, hair-dressing and beauty shops

28. Chapter 6 Book Work • Fast Review Page 91 • 1-4 • Fast Review Page 93 • 1-4 • Using Business Key Words Page 94 • 1-15 • (You only have to write the vocabulary term)