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Types of Businesses

Types of Businesses. Topic # 4014 Nick Thompson. 4 Types of Business Structures. Sole Proprietorship Partnership Cooperatives Corporations. Sole Proprietorship. Controlled and owned and operated by individual Can buy or start business Profits are used as owner sees fit

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Types of Businesses

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  1. Types of Businesses Topic # 4014 Nick Thompson

  2. 4 Types of Business Structures • Sole Proprietorship • Partnership • Cooperatives • Corporations

  3. Sole Proprietorship • Controlled and owned and operated by individual • Can buy or start business • Profits are used as owner sees fit • Business built by personal capital

  4. Sole Proprietorship Advantages • Low Start up cost • Tax advantages to small owner • In direct control of business • Minimal working capital requirements • Little government Regulation • Profits go to owner

  5. Sole Proprietorship Disadvantages • Difficult to raise capital without incurring large debt • Owner is 100% financially liable

  6. Partnership • Controlled and owned and operated by 2 or more individuals • Can buy or start business • Profits are used as agreed upon by partners • Business built by owners capital

  7. Partnership Advantages • Partnerships are easily formed • Start up costs are low • Limited government regulation • More management = better decisions • Some tax advantages • More than one source of capital

  8. Partnership Disadvantages • Partners are 100% financially liable • Difficult to find partners that easily cooperate • Limited ability to raise capital • Disagreements between partners may cause confusion with management decisions, employees, etc.

  9. Corporations • Owned by the Stockholders • Operated by the board of Directors • Profits are used as dividends to stockholders or as reserves for operations • Business built by stockholder investment

  10. Corporation Advantages • Specialized management =Greater efficiency • Easy to raise capital • Specific privileges, rights and regulations • Ownership can be transferred • Tax advantages • Limited financial liability

  11. Corporation Disadvantages • Very expensive to organize • Closely regulated by government • Less personal management = lower employee loyalty & output • Can be Double Taxed

  12. Cooperative • Organized by associates who become owner/members • State Charter required to start cooperative • Profits are limited by state law (around 8%) • Members do business through cooperative (group advantage)

  13. Cooperative Differences • Buys and sells primarily to it’s own members • Co-ops sometimes exempt from antitrust regulations • Highly regulated buy government • Often resented buy other members of the business community

  14. Recap • 4 Business types- Cooperative Corporations Partnership Sole Proprietorship • Each serves specific purpose and has advantages and disadvantages • All are used for specific purpose, all work well for different types of enterprises

  15. Resources • MSU Agriscience Website www.agriscience.msu.edu • Calpoly Agriscience Website www.calpoly.edu/~aged/

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