Business Ownership and Operations

1. Business Ownership and Operations Intro To Business Chapter 6

2. Types of Business Ownership • Sole Proprietorship • A business owned by one person. Three-quarters of all businesses in the U. S. take this form of organization • Advantages: • Easy to do (licenses/permits) • In charge of their business • Can make all of the decisions • Can keep all of the profits • Usually have lower taxes (taxed once) 6-1

3. Types of Business Ownership • Disadvantages: • Unlimited liability • The owner is responsible for the company’s debt’s. If the owner has more debt than they receive, the owner has to make up the difference.

4. Types of Business Ownership • Partnership • A business owned by two or more people who share its risks and rewards. • Advantages: • Easy to start • Easier to obtain capital • Banks are often more willing to lend money • Taxed only once • Each partner brings specific skills and talents

5. Types of Business Ownership • Disadvantages • All of the partners share the risk • Problems with partners getting along • Unlimited Liability • Corporation • Company that is registered by a state and operates apart from its owners • To raise money, the owners can sell stock or shares of the company

6. Types of Business Ownership • Advantages • Limited Liability • Holds a firms owners responsible for no more than the capital that they have invested in it. • Ability to raise money by selling stock • Company does not end if an owner dies • Disadvantages • Double taxes • Extra governmental restrictions • More difficult and costly to start

7. Types of Business Ownership • Other ways to Organize a Business • Cooperative • An organization that is owned and operated by its members • When a group of businesses pool their resources • Purpose – to save money on the purchase of certain goods and services Ex. Ocean Spray • Nonprofit Organization • Type of organization that focuses on a providing a service, but not to make a profit. • Must register with the government. Because they do not make a profit they do not pay taxes. Ex. Churches • Franchise • A contractual agreement to use the name and sell the products or services of a company in a designated area • Ex. McDonalds, Tim Horton’s • You have to invest money and pay franchise fees or share the profits. 6-1

8. Questions/Reflection • What is the difference between a sole proprietorship and a partnership? • If a partner makes a bad decision, what responsibility do the other partners have? • Why are cooperatives formed? • Compare limited liability and unlimited liability. 6-1

9. Types and Functions of Businesses • Types of Business • Producers • Business that gathers raw goods • Agriculture, mining, fishing, and forestry • Processors • Changes raw materials into more finished products • Made from raw goods that require further processing • Crude oil to gasoline, iron ore into steel • Manufacturers • Makes finished products out of processed goods • Cars, CD’s, Computers 6-2

10. Types and Functions of Businesses • Intermediaries and Wholesalers • Intermediary – A business that moves goods from one business to another • Buys goods, stores them and resells them • Wholesaler – Distributes goods • Retailers and Service Businesses • Retailer – Purchases goods from wholesaler and sells them to consumer • Record stores and auto dealers

11. Types and Functions of Businesses • Functions of Business • Production and Procurement • Production – Process of creating, expanding, manufacturing or improving goods and services • Procurement – The buying and reselling of goods that have already been produced. • Marketing • Process of planning, pricing, promoting, selling and distributing ideas, goods, and services • Getting consumers to buy the product

12. Types and Functions of Businesses • Management • The process of achieving company goals by planning, organizing, directing, controlling and evaluating the effective use of resources. • Finance and Accounting • Finance – The business or art of money management • Requires analyzing financial statements to make future decisions • Accounting – Maintaining and checking records, handling bills and preparing financial reports for a business.

13. Questions • What is the difference between a producer and a processor? • Identify the five functions of business. • Give an example of how the accounting and finance functions can affect a business’s marketing and production processes.