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Forms of Business Ownership

Forms of Business Ownership. Sole Proprietorship. A business owned exclusively by one person Advantages: Easy to organize Few legal requirements Owner has complete control of the business. Sole Proprietorship. Disadvantages: Can be difficult to raise money

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Forms of Business Ownership

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  1. Forms of Business Ownership

  2. Sole Proprietorship • A business owned exclusively by one person • Advantages: • Easy to organize • Few legal requirements • Owner has complete control of the business

  3. Sole Proprietorship • Disadvantages: • Can be difficult to raise money • Owner is personally responsible for all debt

  4. Partnership • A business owned by two or more people • Advantages: • Easy to start • More sources of capital (money) • Share decision-making

  5. Partnership • Disadvantages: • Profits must be shared • Partners share the debt of the business • Any one of the partners can create a binding agreement for the business • A partnership agreement is recommended to clearly state the responsibilities of each partner

  6. Corporation • A separate legal entity formed by documents files with a state. It is owned by one or more shareholders and managed by a board of directors. Most corporations have several owners who invest in the business by purchasing shares of stock.

  7. Corporation • Advantages: • If the business fails, its debts cannot be collected from the owners • Issuing stock can create revenue • Decisions made by a Board of Directors

  8. Corporation • Disadvantages • More complicated and expensive to set up the business • Subject to more government regulations than sole proprietorships or partnerships • Profits taxed twice: Corporation pays taxes on income, and shareholders pay taxes on dividends.

  9. Forms of Ownership Among U.S. Businesses

  10. Other Forms of Ownership • A Limited Liability Partnership identifies some investors who cannot lose more than the amount of their investment. • A Joint Venture is a unique business organized by two or more other businesses to operate for a limited time and for a specific project.

  11. Other Forms of Ownership • An S-Corporation offers the limited liability of a corporation for a small business, and income is only taxed once. • A Limited Liability Company (LLC) provides liability protection for owners, and is simpler to organize than a corporation. • A Nonprofit Corporation is a group of people who join to do some activity that benefits the public.

  12. Other Forms of Ownership • A Cooperative is owned by members, serves their needs, and is managed by their interest. • A Franchise is a written contract granting permission to operate a business to sell products and services in a set way.

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