Starting a New Business

Or…how to be an Entrepreneur and make a lot of money!

Why Support Business?

Meet consumer demand

Create jobs

Spur economic growth

Sole Proprietorships

“Business owned and managed by one person. Owner makes the profit and is responsible for debts.

Advantages: Ease of start up and closing, few restrictions, full decision-making power and profits, individual taxation.

Disadvantages: Unlimited liability, limited growth potential, limited life.

Businesses Organized as Partnerships Two or more owners own and operate a business

together. They share profits and liability.

Advantages: ease of start-up, few restrictions, shared decision-making power, specialization by partners, individual taxation, and increased growth potential

Disadvantages: unlimited liability, conflict between partners, keeping continuity if a partner leaves

Businesses as Corporations

Business owned by shareholders who have limited liability in the firm’s debts. It is a legal entity that can conduct business affairs in its own name (14th Amendment)

Advantages: limited liability, greater growth potential, professional management, and long life

Disadvantages: complexity of start-up, loss of owner control, greater government regulation, tax on profits at the corporation and shareholder levels

*Multinational corporation operates in more than one country*Public vs. Private corporations…

Franchises, Cooperatives, and Nonprofit OrganizationsBusiness Franchise: parent company (franchiser)

grants to independent owner (franchisee) exclusive right to use trade name and sell products in designated location.

Cooperative: business owned and operated by a group of individuals for shared benefit. Ex: credit unions, agricultural co-ops.

Nonprofit Organization: functions like a business, but no profit. Supports a particular private or public goal.

Rights and Responsibilities of Business in Free Enterprise System?Many rights/responsibilities same as individuals

– ex., taxes, free speech

Ethics influences consumer decisions, i.e. Starbucks or Nike Ethical vs. Legal?

Important Vocabulary

Sole proprietorship Liability Partnership Corporation Multinational corporation Business franchise Cooperative Nonprofit organization