Types of Agribusinesses

Types of AgribusinessesWhat are the 3 types of agribusinesses?Single (sole)ProprietorshipPartnershipCorporation

What 3 types of corporations are there?Subchapter CRegular corporationsSubchapter SFamily Farms and Small BusinessesSubchapter 7Cooperatives

Single (Sole) ProprietorshipOwnershipOne personStart Up CostsLarge amount of capital by ownerTaxesPay only once on the income from the companyExampleTractor Repair Shop

Single (Sole) ProprietorshipLiabilityUnlimited (personal and business assets of owner)Responsibility for Decisionsowner

Single (Sole) ProprietorshipMajor AdvantagesSimple to startBe your own bossFew government regulationsChoose own products & hoursPay taxes only once on income from companyReceive all profits

Single (Sole) ProprietorshipMajor DisadvantagesLimited financial resources (capital needed to begin)Difficulty in managementOverwhelming time commitmentLimited growthRestriction of expansion potentialFew fringe benefits

PartnershipOwnershipGeneral (all is shared)Start Up CostsShared by partnersTaxesIncome taxed only onceExampleAg. Machinery Dealership, Landscape Business

PartnershipLiabilityShared in General Partnership but not unlimited.Responsibility for DecisionsShared between partners in a general partnership

PartnershipMajor AdvantagesMore financial resourcesShared management & pooled knowledgeLonger survivalSpecial skills of partnerPay no taxes as a businessLimited government regulations

PartnershipMajor DisadvantagesDivision of profitsDisagreement among partnersDifficult to terminateDissolved when partner dies or leaves the partnershipDivided management authority

CorporationOwnershipMany peopleStart Up CostsFrom multiple sourcesTaxesBusiness is taxed (double taxation)ExamplePhillip Morris, Procter & Gamble, Kroger

CorporationLiabilityBusiness only (not personal)Responsibility for DecisionsBoard of Directors

CorporationMajor AdvantagesMore money for investmentPerpetual lifeEase of ownership changeDraw talented employeesSeparation of ownership from managementLegal entity

CorporationMajor DisadvantagesInitial costPaperworkTwo tax returns (double taxation)Difficulty of terminationPossible conflict with boardMust follow state lawsOwners have limited control

CooperativeOwnershipOwned & controlled by membersStart Up CostsBuy sharesTaxesMost are exempt (if 50% of business with members & profits returned in dividends)ExampleLand O Lakes, Sunkist

CooperativeLiabilityMembers risk only the amount they have investedLimitedResponsibility for DecisionsEach member gets one vote

CooperativeMajor AdvantagesContinues at death of shareholdersBenefits go to membersShare in direction of businessBroad capital baseSpecial tax advantageLegal entityCooperativeMajor DisadvantagesLegal formalitiesLimited control over businessExpensive to form, maintain, & dissolveFew persons may gain excessive powerLack of member participation

FranchiseOwnershipBuy Franchise name & productsStart Up CostsLarge Start Up & Franchise CostsTaxesBusiness is taxedExampleMcDonalds

FranchiseLiabilityLimitedResponsibility for DecisionsManagement (from above)

FranchiseMajor AdvantagesNationally recognized name & reputationHelp with finding a good locationManagement system with successful track recordSuccessful methods for inventory and operationsFinancial advice & assistanceTraining for owners & staff

FranchiseMajor DisadvantagesAdditional costs for marketingMonthly percentage of gross sales may go to parent companyCompetition from other franchisesRegulations: management, dcor, selling, rulesCoattail effects if other franchises fail nationwide