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Types of Business Ownership

Types of Business Ownership. Why does type of ownership matter?. Sole proprietorship. Single individual owns, operates, and has liability for business Person and the business are one Simplest form of business to create No separate tax filings Sole responsibility for business

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Types of Business Ownership

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  1. Types of Business Ownership Why does type of ownership matter?

  2. Sole proprietorship Single individual owns, operates, and has liability for business Person and the business are one Simplest form of business to create No separate tax filings Sole responsibility for business May be difficult to get loans or attract investors

  3. Partnerships Business in which at least two individuals share management, profit & liability General partnership – all partners are equal Limited partnership – some partners are more equal than others General partners – management role, unlimited liability Limited partners – similar to investors

  4. Partnerships Simple to create – handshake deal Partnership agreement More heads are better than one Partners (or General Partners) have unlimited liability for the acts of others

  5. Corporations Separate legal entity or person Liability limited to assets of corporate person Owners = shareholders Incremental ownership, role in management Profit Dividends Share appreciation

  6. Corporations Easier access to capital Eternal life – business can survive death of founder Complex & expensive to create & maintain Separate taxation Securities laws for publicly traded firms

  7. Specialty corporations S corporations – small business corporations taxed liked partnerships Limited liability – sole proprietorship or partnership with limited liability for owner

  8. Specialty corporations Nonprofit corporation – tax-exempt organization intended to serve public good Red Cross Habitat for Humanity/Rebuilding Together Newman’s Own?

  9. Types of Business Ownership Why does type of ownership matter? Read Choice of Business Entities Complete chart

  10. Franchise • Parent company • Sells franchises • Provides services • Franchise operation • Well known name & brand • Group purchasing power • Provides percentage of profits to parent

  11. Franchise operations Research Arby’s, Chick-fil-A, or another franchised restaurant operation Financial investment On-going fees Support parent offers its operators Good & services provided Check investors or search “franchise” to find answers

  12. Starting a restaurant – as a franchise or not? Why selected? What was most important reason? Disadvantage of option chosen, and why overcome Discuss other option. Why not selected? Discuss type of ownership Why selected? What was most important element? Disadvantages of type of ownership, and why overcome Discuss one type of ownership not selected. Why not selected? Form of Business Related to Cornerstone Stock Franchise or Not

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