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: • Small Service Businesses (Plumbers, Carpenter, Florist, Hairstylist) • Retail Establishments (Franchises, Mom & Pop) • Home Based Businesses • Farmers • Advantages? Disadvantages?

4. Small Business Stats • Independent business with relatively few employees • 99.7% of the 26 million U.S. businesses • Responsible for 60-80% of all new jobs • Owner = Manager • One or few locations • Small market • Not dominant in field

5. Disadvantages: Advantages: • Easy Start-Up • Licenses and Zoning • Control • Profits • Taxation • Individual not business • Unlimited Liability • Sole Responsibility • Limited Growth Potential • Funding • Longevity

6. Partnerships • Owned and Controlled by two or more people • Advantages? Disadvantages? • Examples include: • Doctors, • Lawyers, • Accountants • Construction Nearly the same as Sole-Proprietorship but with more growth potential

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

8. Disadvantages Advantages • Easy Start-Up • Taxation • Increased Capital • Specialization • Shared Decision Making & Loss • Longevity increased • Unlimited Liability • Conflict • Longevity • Contracts / Lawsuits

9. 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

10. 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

11. Corporate Disadvantages • Corporate Issues • Corporate charters (paperwork) • expensive and difficult to obtain • Federal and state governments regulate corporations • Slow decision-making process (idea, discuss, present, vote, act) • Stockholder Issues • Earn profit without actually working for the company • Lack of control • Shared Issues • Corporate profits are TAXED TWICE!! • Corporate income • Dividend income

12. Franchising • Initial Franchise Fees • Royalties Fees • Trademarks & Names • Advertising & Promotion • Business Location • Exclusive territory • Right of first refusal • Equipment and supplies • Agreement termination • Franchise agreement

13. Disadvantages Advantages • Get a viable business • Name recognition • Network of support • Blueprint for success • No guarantee of wealth • High monthly royalties • Limited independence • Limited flexibility

14. Assignment • Forms of Business Ownership Thinglink Assignment