Forms of Ownership

1. Forms of Ownership Coach Johnson

2. 3 Types of Ownership • Sole Proprietorship • Partnership • Corporation

3. Sole Proprietorship Overview • Owned and Controlled by one person • Oldest, simplest, most common • Examples include: • lawyers, plumbers, carpenters, hairstylists, florists, and farmers • Advantages? Disadvantages?

4. Sole Proprietorship Advantages: • Easy start up • Small Capital and few legal consideration • Zoning and Licenses may be required • Not difficult to obtain • Control • Take opportunities, react to troubles • Personal satisfaction

5. Sole Proprietorship Advantages: • Profits • Stay in house • Major decision in choosing this type • Taxation • Individual not business

6. Sole Proprietorship Disadvantages: • Unlimited Liability • Personally responsible for all goods and bads • Sole Responsibility • All aspects of running business • Time, energy, decision making

7. Sole Proprietorship Disadvantages: • Limited Growth Potential • Small loan or Savings • Difficulty getting loan • Collateral • House • Car • More Capital = Expansion

8. Sole Proprietorship Disadvantages: • Longevity • Firm/Business life • Depends on owns: • Health • Hard Work • Time • Effort

9. Sole Proprietor Activity • Name three challenges facing a sole proprietorship • Name two types of careers we discussed • Name the two main advantages for being a sole proprietor • How is a sole-proprietor taxed?

10. Partnerships • Owned and Controlled by two or more people • Advantages? Disadvantages? • Examples include: • Doctors, lawyers, accountants, and construction companies

11. Partnerships Overview • General partnerships • Enjoy equal decision-making authority • Each has unlimited liability • Limited Partnership • Provide financial capital in exchange for a share of the profits • Rarely take an active role in business decisions • Liability is limited for some partners

12. Advantages of Partnerships • Easy start up • Low costs and few government regulations • Partnership contracts • Outline responsibilities of each • Includes conditions for adding/dropping partners, and dissolving the partnership

13. Advantages of Partnerships • Specialization • Each can have different duties • Helps realize specific talents • Pizza Business Example • Shared Decision Making & Loss • Minimize the chance of mistakes • Secure capital easier than sole • Take hit = keep going

14. Partnership Disadvantages • Unlimited Liability • Can lose more than you invest • Still not a large number of owners, much risk • Conflict • Difference of opinions • Lower morale • Delay decisions • Affect overall efficiency

15. Partnership Disadvantages • Lack of longevity • Willingness and Ability of teamwork • Illness • Death • Conflict

16. Partnerships Assignment • Take a few minutes to research partnership contracts online. • Imagine that you are opening a business with one partner – create an outline that details some of the items you would include in your partnership contract. • See examples • 1-Contract • 2-Outline

17. Corporations • A corporation – group of owners (stockholders) share profits (and losses) • Corporations can • own property • hire workers • make contracts • pay taxes • sue and be sued • make and sell products

18. Corporate Advantages • Benefits for Stockholders • Limited liability (only as much as they invest) • Can sell ownership at any time • Benefits for Corporations • Founders have limited liability • Separation of ownership from management • Easy to raise capital • Longevity

19. Corporate Disadvantages • Corporate Issues • Corporate charters • expensive and difficult to obtain • Federal and state governments regulate corporations • Slow decision-making process (idea, discuss, present, vote, act)

20. Corporate Disadvantages • Stockholder Issues • Earn profit without actually working for the company • Lack of control • Shared Issues • Corporate profits are TAXED TWICE!! • Corporate income • Dividend income