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Types of Business. Ch. 22, Section 1. 4 Elements of Business. Expenses What you need to start & continue a business Advertising Introduction and reminder of your business Receipts & Record Keeping Needs to be accurate and dependable – for profits & losses Risk (profit vs. loss)

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Types of business

Types of Business

Ch. 22, Section 1

4 elements of business
4 Elements of Business

  • Expenses

    • What you need to start & continue a business

  • Advertising

    • Introduction and reminder of your business

  • Receipts & Record Keeping

    • Needs to be accurate and dependable – for profits & losses

  • Risk (profit vs. loss)

    • Risk is a consequence to the advantage of being in business

Considerations when starting a business

Establishment of inventory

Use of computers/Technology

Turbo Tax

Time – the opportunity cost. You could be working for someone else.

Considerations When Starting a Business

3 types of businesses
3 Types of Businesses

  • Sole Proprietorship

    • Owned by 1 person

    • Easy & relatively inexpensive to start would be a need

    • Small businesses typically

    • Most common form of business

    • Owner receives all profits

    • Unlimited Liability

Sole proprietorship


Receive all profits

Quick decisions because no consultation

Relatively low taxes


Unlimited liability

Handle all decisions

Time consuming

Rely on own funds

Business depends on one person

Sole Proprietorship

3 types of businesses cont
3 Types of Businesses cont.

2. Partnership

  • Owned by 2 or more individuals

  • Articles of Partnership – Partners sign an agreement on what each is responsible for.

  • Limited Partnership

    • Partners are not equal

    • General Partner – majority of control

    • Limited Partner – own a small part – do not voice opinions & are responsible only for what they put in

    • LLPs (Limited Liability Partnerships) [mix of corporations and partnerships): Very popular with lawyers, accountants, and architects.

  • Joint Venture

    • temporary partnership to do a job



Losses are shared

More efficient than proprietorships

Pay taxes on share of profit

Easier to borrow money


Profits are shared

Unlimited liability, most of the time

Must reach agreements

Committed partners


3 types of businesses cont1
3 Types of Businesses cont.

3. Corporation

  • Owned by many

  • Started by a founder

  • Owned by Stockholders

  • Run by a Board of Directors

  • State government issues a charter to run the business

  • Complicated structure

  • Business has the same rights as an individual

  • Are Double Taxed

  • Founder’s responsibilities

    • Register with the state government for a charter

    • Sell Stock

    • Select the initial Board of Directors

  • Board of Director’s responsibility

    • Elected by Stockholders

    • Supervise & control the corporation

    • Make all major decisions



Owners do not have to devote time to make money.

Stockholders have limited liability; they only lose what they put in.

Individuals trained in specific areas make decisions.


Decisions are slow. Interest of the board may differ from the stockholders.

Double taxation. Govt. taxes corporate profit than individual shares.

Stockholders have little or no say in how business is run.


Stocks and bonds

Stock: Individual ownership in a corporation. Shareholder receives voting rights and dividends.

Bond: Promise by a corporation to pay a stated amount of interest over a period of time.

Stocks and Bonds

Other types of businesses
Other Types of Businesses

  • Franchise – sell the name & structure of a business

    • Help train employees & set up the business

    • Franchisee – pays a start up fee & annual fee

  • Non – Profit – business does not run to make money

  • Cooperative – individual businesses that work together to benefit all members

    • Producer – Ex: Farmer’s Market

    • Consumer – Ex: PCC Natural Markets, REI

    • Service – Ex: Credit Unions, Utility companies