Bell-Work

1. Bell-Work • Please state how each of the businesses are organized?Think about how business are owned. • Ching’s Hot Wings • (Sole Proprietorship) • FedEx • (Corporation) • Silver Caboose • (Partnership)

4. Objectives • Describe the advantages and disadvantages of the three major forms of business organizations. • Describe how cooperatives and nonprofits are like and unlike corporations and franchises.

5. The Main Idea Sole proprietorships, partnerships, and corporations are the most common forms of business organization. Cooperatives, nonprofits, and franchises are other forms.

6. Question: • What does an entrepreneur need to know about the different types of ownership? • Entrepreneurs need to have a good understanding about the advantages and disadvantages of each type of ownership, so that they can make the best decision for them.

7. Key Concepts • Organizing a Business • Other Ways to Organize a Business

8. Key Term soleproprietorship a business owned by one person when the owner is responsible for the company’s debts unlimitedliability

9. Key Term a business owned by two or more people who share its risks and rewards partnership a company that is registered by a state and operates apart from its owners corporation

10. Key Term holding a firm’s owners responsible for no more than the capital that they have invested in it limitedliability an organization that is owned and operated by its members cooperative

11. Key Term a type of business that focuses on providing service, not on making a profit nonprofitorganization a contractual agreement to use the name and sell the products or services of a company in a designated geographic area franchise

12. Organizing a Business The three main types of business organizations are: SoleProprietorships Partnerships Corporations

13. U.S. Sole Proprietorships, Partnerships, and Corporations Figure 6.1

14. Sole Proprietorships About three-quarters of all businesses in the United States are sole proprietorships. sole proprietorship a business owned by one person

15. Advantages of Sole Proprietorships Easy to start Proprietors are in charge Proprietors keepall the profits Taxes are lowerthan a corporation’s

16. Sole Proprietorships A major disadvantage of owning a sole proprietorship is that the owner has unlimited liability. unlimited liability when the owner is responsible for the company’s debts

17. Disadvantages of Sole Proprietorships Limited accessto credit Many run outof money The owner may not have the necessary skills The business endswhen the owner dies

18. Question: • Suppose you decide to make and sell jewelry as a business. Why might you want to be the sole owner of the business? • It is easy to start, taxes are lower, and the owner makes all the decisions.

19. Partnerships To start a partnership, you need a partnership agreement. partnership a business owned by two or more people who share its risks and rewards

20. Advantages of Partnerships Easy to start Easier toobtain capital Easier toobtain credit Not dependent on a sole person Only taxed once Diversity in skills

21. Disadvantages of Partnerships Business risk is shared Unlimited legal and financial liability is shared If one partner makes a mistake, all partners are responsible

22. Question: • Say you had a partner who made a bad decision that caused your business to lose money. What steps might you take to correct the situation? • Because partners are responsible for debts in a partnership, you must pay your share of the debt. If the partner makes other bad decisions, you might want to decide to end the partnership to limit further loss.

23. Corporations To form a corporation, the owners must get a corporate charter from the state where their main office will be located. corporation a company that is registered by a state and operates apart from its owners

24. Corporations Limited liability is a major advantage of a corporation. limited liability holds a firm’s owners responsible for no more than the capital that they have invested in it

25. Advantages of Corporations Limited liability Ability to raisemoney byselling stock Business doesnot end when anowner dies

26. Disadvantages of Corporations Double taxation More governmentregulation Difficult andcostly to start • Income is taxed. • Stockholders pay taxes on profits issued to them

27. Other Ways to Organize a Business Other ways to organize a business include: Cooperative NonprofitOrganization Franchise

28. Other Ways to Organize a Business The purpose of a cooperative is to save money on the purchase of certain goods and services. cooperative an organization that is owned and operated by its members

29. Question: • Why does a cooperative make sense? • Members have much in common and benefit from working together.

30. Other Ways to Organize a Business A nonprofit organization does not pay taxes because it does not make a profit. nonprofit organization a type of business that focuses on providing a service, not making a profit

31. Other Ways to Organize a Business To run a franchise, you have to invest money and pay franchise fees or a share of the profits. franchise a contractual agreement to use the name and sell the products or services of a company in a designated geographic area

32. What is the difference between a sole proprietorship and a partnership? A sole proprietorship is owned by one person. A partnership is owned by two or more people.

33. If a partner makes a bad decision, what responsibility do the other partners have? All partners share responsibility for a bad decision.

34. Why are cooperatives formed? so that the members have advantages in buying and selling products and services

35. Assignment • In your groups, you will read two different scenarios and answer the questions that follow. • You will draw two scenarios from my cards • If you finish early, then you must complete the other two scenarios • If you also finish all the scenarios, please write the vocabulary words in your own words.

36. Objectives/ Exit Ticket • Describe the advantages and disadvantages of the three major forms of business organizations. • Describe how cooperatives and nonprofits are like and unlike corporations and franchises.