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Forms of Ownership

This guide examines the three main forms of business ownership: Sole Proprietorship, Partnership, and Corporation. It provides an overview of each type, highlighting their advantages and disadvantages. Sole Proprietorships are the simplest and most common, while Partnerships involve shared ownership and decision-making. Corporations, with their distinct separation of ownership and management, offer limited liability for shareholders. Learn how each ownership type impacts control, liability, taxation, and growth potential in the business landscape.

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Forms of Ownership

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  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

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