Different Types of Businesses Ch. 8

1. Different Types of BusinessesCh. 8

2. Entrepreneurs • Profit seeker, risk taker who develops a new product or process • Assumes risk of loss or profit • They create something of value.

3. Creative Changes in market economy • 1. Introduce new products • 2. Improve quality of Existing Products • 3. Introduce new production methods • 4. Introduce new ways of doing business

4. Financing the Business • “You need money to make money” • Financial capital—the money needed to start or expand the business

5. Chapter 8 Sole Proprietorship and Partnerships • Sole Proprietorship- a firms is owned and managed by a single individual. • Earns all the firms’ profits & responsible for losses. • Some have many employees, but many do not. • A self-employed person is not considered to be a paid employee.

6. Who is Sole Proprietor? • Most community business are owned by sole proprietors. • Ex. Hair stylist, truckers, lawyers, doctors, & dentist. • Consist of just one self-employed person • Work at the business all the time through out the year, only part time, part of the year. • 5% are US business sales

7. Advantages of Sole Proprietorships • Most common type of business • 1. Easy to Start-minimum red tape & legal expense. Need a business license & permit to collect state & local sales taxes. • 2. Few Government Regulations- maintaining accurate tax records and complying w/ employment laws. No employees. • 3. Complete Control- boss, w/ complete authority over all business decisions, such as what to produce, what resources to hire, & how to combine these resource.

8. continued • 4. Owner Keeps All Profit- does not have to share profits. • 5. Lower taxes- Income is taxed only once as the owner’s personal income. (corporate income is taxed twice.) • 6. Pride of Ownership-Creating a successful business & watching it grow can provide a sole proprietor tremendous satisfaction.

9. Disadvantages of Sole Proprietorship • 1. Unlimited Personal Liability- a sole proprietor faces unlimited personal liability for any loss. • Liability-is the legal obligation to pay any debts of the business. • Owner is responsible to pay. (personal savings or sell personal assets, such as a home or automobile.

10. continued • 2. Difficulty Raising Financial Capital-has no partners or other financial backers, raising enough money to get the business going. • 3. Limited Life- business ends when the owner dies or leaves the business. Sold & becomes new ownership.

11. continued • 4. Difficulty Finding and Keeping Good Workers- lack of permanence and difficulty raising financial capital, trouble offering workers job security. • 5. Unlimited Responsibility- great deal responsibility.

12. Partnership • Partnership-which involves two or more individuals who agree to contribute resources to the business in return for a share of the profit. • One is talented and the other supplies the money.

13. Homework • Read Chapter 8, sections 8.1—8.3, write down all of the key terms and define them as well as the key concepts at the end of each section (p.233—247. • Do 1-5 don’t do the graphing.