Slide 1

Chapter 6 Business Ownership And Operations

Slide 2

Types of Business Ownership The three different ways you can own a business are: Sole proprietorship Partnership Incorporation

Slide 3

Sole Proprietorship A sole proprietorship is a business owned by only one person. The advantages to having your own business are: Its easy to start You get to be your own boss You get to keep all the profits The taxes are usually low

Slide 4

Sole Proprietorship The disadvantages to having your own business are: You have to pay for everything yourself You might have to use your personal savings or borrow money from the bank You might lack business skills

Slide 5

Sole Proprietorship A serious disadvantage to owning a sole proprietorship is that you have unlimited liability, or full responsibility for your companys debts. If you lose more money then you make, you have to make up the difference You could lose your personal savings, your property, and even your car if the business cannot repay debts

Slide 6

Partnership A partnership is a business owned by two or more persons who share the risks and rewards. To start a partnership you need to draw up a partnership agreement, which is a contract that outlines the rights and responsibilities of each partner.

Slide 7

Partnership The advantages to partnership are: You might need only a license to start and have to pay taxes only on your personal profits. Each of your partners can contribute money to start the business. Banks are often more willing to lend money to partnerships than sole proprietorships. Your partners can bring different skills to the business.

Slide 8

Partnership The disadvantages to partnership are: You not only share the risks with your partners, you also share the profits. You might not get along with your partners. You share unlimited legal and financial liability with your partners.

Slide 9

Corporation Suppose your car repair business has grown and you want to add more shops, or buy new equipment. You need more money or bring in new partners What you can do is form a corporation A corporation is a business owned by many people but treated by law as one person.

Slide 10

Corporation A corporation can own property, pay taxes, it exits separate from its owners To form a corporation, you need to get a corporate charter from the state your headquarters is in. This charter is a license to run a corporation To raise money, you can sell stock, or shares of ownership in your corporation.

Slide 11

Corporation The new owners (stock holder) pay a set price for each share. For each share of common stock, the stockholder gets a share of the profits and a vote on how the business is run. You also must have a board of directors who control the corporation.

Slide 12

Corporation You also must have a board of directors who control the corporation. They dont run the day to day business operations of the company, but they hire officers to do it. Each yeah the stockholders vote on the board members

Slide 13

Corporation A major advantage of a corporation is its limited liability. If your company loses money, the stockholders lose only what they invested. Another advantage is that the corporation doesnt end if the owners sell their shares. As long as your business makes money you can continue the company by reselling the shares

Slide 14

Corporation A disadvantage of a corporation is that you often have to pay more taxes. Double taxation The government closely regulates corporations. It is more difficult to start a corporation than a sole proprietorship or a partnership and running a corporation can be much more complicated.

Slide 15

Alternative Ways to do Business You might find it easier to start a business with the help of an established company Franchises, Cooperatives, and Nonprofit Organizations offer you other ways to do business

Slide 16

Franchise A franchise is a contractual agreement to sell a companys products or services in a designated geographic area. We have several franchises in Delphi Exp: Arbys, Pizza Hut, DQ, Monicals. Pizza King, Blockbuster If you decided to open a Pizza Hut then you are the franchisee and Pizza Hut is the franchisor

Slide 17

Franchise 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 system of operation

Slide 18

Franchise You can operate a franchise yourself, as a sole proprietor, as a partnership with someone else, or even as a corporation. An advantage of opening a franchise is that its easy to start. The name of the parent company can be a big draw for customers. The disadvantage of running a franchise is that the franchisor is often very strict about how the business is run.

Slide 19

Nonprofit Organization Not everyone goes into business just to make a profit You might want to start a business whose main purpose is to help children, the poor, local artist, or animals A nonprofit organization is a type of business that focuses on providing a service rather than making a profit.

Slide 20

Nonprofit Organization The American Red Cross and Meals on Wheels are nonprofit organizations Like a corporation, a nonprofit organization has to register with the government and might be run by a board of directors. Because it doesnt make a profit, a nonprofit organization doesnt have to pay taxes.

Slide 21

Nonprofit Organization Instead of investors, nonprofit organizations rely on government grants, and donations from individual businesses. Donors dont receive dividends like investors, but they can deduct their donations from their taxes.

Slide 22

Cooperative A cooperative is an organization owned and operated by its members for the purpose of saving money on the purchase of certain goods and services.. For example Ocean Spray is a cooperative of cranberry growers A cooperative is like a corporation in that it exists as a separate entity from the individual businesses.

Slide 23

Cooperative You also need a government charter to start one A cooperative can sell stock and choose a board of directors to run it. With a cooperative small farmers, book dealers can pool their resources, and save money by buying insurance, supplies or advertising as a group Cooperatives pay less in taxes than regular corporations do.

Slide 24

Types of Businesses There are many different types of businesses and different ways to classify them One way to classify businesses is to group them by the kind of products they provide: Producing raw goods Processing raw goods Manufacturing goods from raw or processed goods Distributing goods Providing services

Slide 25

Producers A producer is a business that gathers raw products in their natural state. Raw goods are materials gathered in their original state from natural resources such as land and water. Farmers who grow wheat, or corn are producers So is a miner who digs for ore in Minnesota Industries that are producers include agricultural, mining, fishing, and forestry

Slide 26

Processors Most of the time we do not use raw goods in the same form they where found in Processors change raw materials into more finished products. Processed goods are made from raw goods and may require further processing. For example wheat is turned into flour, crude oil into gasoline, iron into steel Paper Mills, Oil refineries, and smelting plants are types of processors

Slide 27

Manufactures Manufacturers are businesses that make finished products out of processed goods. They turn raw or processed goods into finished goods that require no further processing and ready for the market Pepsi Co., Boeing, G.E., are types of manufacters

Slide 28

Intermediaries An intermediary is a business that moves goods from one business to another. It buys goods, stores them, and then resells them. A wholesaler, also known as a distributor, distributes goods. Wholesalers buy goods from manufacturers in huge quantities and resell them in smaller quantities to their customers, usually other companies.

Slide 29

Intermediaries A retailer purchases goods from a wholesaler and resells them to the consumer, or the final buyer of the goods. Service stations, record stores, and auto dealers are types of retailers

Slide 30

Service Business Service businesses provide services rather than goods. Services are the products of a skill or an activity, such as hairstyling and car repair. Some service businesses meet needs, like medical clinics, and law firms Others provide conveniences such as taxies, copy shops