Forms of Business Ownership SchoolRack by jennyyingdi

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									Forms of Business Ownership

          Chapter 5
             5-2
Did You Know?
             PROPRIETORSHIP
• 1 person
• Easiest of all types

Pros:                    Cons:
• All profit goes to     •Must shoulder entire
  owner                  debt of business
• Total control over     •Creditors can take
  business               personal assets to
                         satisfy business debt
          Proprietorship cont’d
• Most businesses start off this way (hobby or
  no experience)
• Most required to start is a license/permit, and
  registration
• Tax advantage—reduces your personal
  income and thus the taxes you pay. The
  downside? All your assets are fair game to
  satisfy business debt.
              PARTNERSHIP
• Run by 2 or more people
• Decisions are shared
• No separation of business and personal assets

Pros                    Cons
• more money and        • if business fails, can lose
knowledge               everything, including
• share the burden of   personal wealth
work                    • If partner leaves or dies,
                        must be dissolved
                   CORPORATION
• Separate legal entity
• Owned by shareholders
• Money raised by selling shares of stock in the
  business
• Subject to more laws and regulations (see articles of
  incorporation)
Articles of
Incorporation
•Defines ownership
and operating
procedures
•Names a board of
directors (those who
make major decisions
for the business)
            Corporation cont’d
Pros                        Cons
• Liability is limited to   • decisions made by a
  amount invested           board
• Easy expansion            • record of operations
                            must be provided
• Sell stock to change      • corporate taxes must
  ownership                 be paid
• Survives beyond life      • individuals also pay
  of original owner         taxes on earnings
       Specialized partnerships &
             Corporations
• Limited liability partnership (can be difficult and
  costly to set up)
• Joint venture (operated by multiple businesses for a
  limited time)
• S-corporation (taxed only on personal earnings)
• Limited Liability Company (offers protection to
  owners, no article of incorporation needed
• Nonprofit Organization (benefits public, tax free,
  must still be government approved
          Co-ops & Franchises
• Cooperative (owned by members, serves a
  specific interest such as buying in bulk or
  market their own products together, increase
  bargaining power)
• Franchise (allows another person to operate a
  business in a specific way, while keeping
  ownership and maintaining control of all
  products/services

								
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