TYPES OF BUSINESS OWNERSHIPS

It is a business owned and operated by one person

The owner is responsible for all operations of the business and assumes all the risk (unlimited liability)

Borrowing money from the banks may be diffi cult because they usually require collateral when lending money

SOLE PROPRIETORSHIP

Advantages

Owner makes all decisions and is his or her own boss

Owner keeps all the profits

All financial information can be kept secret

This type of business is easy to start or close

DisadvantagesOwner is responsible for

all debtsCosts and time

commitment can be highFunding can be diffi cult

to obtainOwner is responsible for

all aspects of the business

Owner doesn’t have fringe benefits

SOLE PROPRIETORSHIPS

A form of business organization in which two or more people own and operate it

The partners have a partnership agreement drafted by a lawyer Name and location of business Purpose of business Each partner’s investment Structure for dividing profits/losses Duties for each partner Procedure for ending partnership

PARTNERSHIP

Advantages

Partners co-own the business

They share responsibilities

They may have greater financial resources than a sole proprietor

They share business losses

They share time commitment

Disadvantages

Partners have unlimited personal liability for all the other partners

May have conflictsProfits are sharedPartnerships are

more diffi cult to close down than sole proprietorships

PARTNERSHIP

Legal entity that exists independently of its owners (shareholders)

Same right and obligations as a natural personShareholders: people who buy shares in a company,

they become part owners of itShareholders elect a Board of Directors who direct

the overall direction of the corporation – they hire Offi cers (presidents, CEOs, etc.) to decide on objectives for the company – they hire Managers who supervise the employees

Corporations can be either private, public, crown or non-profi t

CORPORATION

Advantages

Limited liability Shareholders do not

operate the company Raise funds easier than

sole proprietorships and partnerships

Have a lower tax rate than the other two

Exist after the death of the owner

Disadvantages

More complicated structures than the other two

Value of company shares can change depending on changes in the stock market

CORPORATION

Owned and operated by a group of people with a strong common interest

Stat-up costs are shared among the members of the co-op

Members own and control the business and make all business decisions

Profi ts are divided up by the amount of business the person does with the co-op

CO-OPERATIVES

Advantages

Limited riskEveryone gets 1

voteBuy in bulk

(savings)

DisadvantagesEach member has the

same amount of control over the co-op not depending on investment

Commitment varies with the amount of money a member has invested

Decision making becomes harder as the number of members increase

CO-OPERATIVES

Already established good for being known

Rights to use the business name and sell product

FRANCHISE

Advantages

Locations and famous companies cost more

Given supportGet a cut of the

action Agreement in a

contractProvides packaging,

etc., and ads

Disadvantages

Hire by himselfNot as much

freedomCosts a lotLack of control

FRANCHISE