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Being a Business Owner. Section 4.2. Read to Learn. The four main ways to become a business owner and the advantages and disadvantages of each The different forms of legal business ownership. Read to learn. How to prepare to finance a new business Factors that can affect business success.

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Presentation Transcript
read to learn
Read to Learn
  • The four main ways to become a business owner and the advantages and disadvantages of each
  • The different forms of legal business ownership
read to learn1
Read to learn
  • How to prepare to finance a new business
  • Factors that can affect business success
main idea
Main idea
  • Knowing the factors that affect a business’s success will help you to launch a successful business
key concepts
Key Concepts
  • Going into Business
  • Owning a Business
  • Operating Your Business
key terms
Key Terms

Operating expenses

Income statement


Gross Profit

Net Profit

  • Start up costs
  • Lease
  • Goodwill
  • Market outlook
  • Franchise
  • Sole proprietorship
  • Partnership
  • corporation
going into business
Going into Business

Four Main Ways to Go into Business

starting a new business1
Starting a new business
  • Examples of start up costs include:
    • Renting or buying space
    • Buying equipment and supplies
    • Buying insurance
  • Key Term:
  • Start-up Costs:
  • The expenses involved in going into business
buying an existing business
Buying an existing business
  • Before buying an existing business, determine whether the problems of the business can be fixed, and at what costs
buying an existing business3
Buying an existing business
  • When buying an existing business, you may be able to keep the existing lease.
  • Key Term:
  • Lease – a contract to use something for a specified period of time
buying an existing business4
Buying an existing business
  • When buying an existing business, you may be able to take advantage of existing goodwill of existing customers.
  • Key Term:
  • Goodwill - Loyalty
buying an existing business5
Buying an existing business
  • When buying an existing business, you should be aware of the market outlook
  • Key Term:
  • Market Outlook – The potential for future sales
buying a franchise
Buying a franchise
  • Buying a franchise offers specific advantages
  • You agree to pay a percentage of your profits to the parent company
  • Key Term:
  • Franchise –
  • The legal right to sell a company’s goods and services in a particular area
owning a business
Owning a business
  • As a business owner, you will have to decide if you will run the business yourself, or if you will share the work and risks.
forms of legal ownership
Forms of legal ownership

Sole Proprietorship

Three basic forms of legal ownership



forms of legal ownership1
Forms of legal ownership
  • Most businesses begin as a sole proprietorship.
  • The owner is responsible for all the business’s assets and debts
  • Key Term:
  • Sole Proprietorship- when the business is completely owned by one person
forms of legal ownership2
Forms of legal ownership
  • In a partnership, all partners are liable for the debts of the business
  • Key Term:
  • Partnership- a legal arrangement in which two or more people share ownership
  • In a corporation, shareholders earn a profit based on the number of shares they own
  • Key Term:
  • Corporation – a business chartered by a state that legally operates apart from the owner(s)
operating your business
Operating your business
  • Whatever type of business you launch, you will need money to finance …. Financing
  • A business plan gives specific information about your business
  • A financial plan spells out your start-up costs, operating expenses, and other costs for the first few months
  • Key Term:
  • Operating Expenses- the costs of doing business, such as the costs of manufacturing and selling the product
ongoing operations
Ongoing operations
  • Financial records are needed for tax purposes and for seeding additional financing
  • The income statement is an essential business record
  • Key Term:
  • Income statement-
  • A summary of a business’s income and expenses during a specific period
ongoing operations1
Ongoing operations
  • The first item in an income statement is revenue
  • Another item in the income statement is gross profit
  • The net profit is an important part of the income statement
  • Key Terms:
  • Revenue – The income from sales
  • Gross Profit – The difference between the cost of goods and their selling price
  • Net Profit – The amount left after operating expenses are subtracted from the gross profit
ongoing operations2
Ongoing operations
  • The balance sheet summarizes a business’s assets, liabilities, and owners equity
  • Assets are anything of monetary value
  • Liabilities are debts a business owes
  • Net worth is the difference between assets and liabilities
  • A cash flow statement is a monthly plan that shows when you anticipate cash coming into the business and when you expect to pay out cash
succeeding in business
Succeeding in business



Factors of Succeeding in Business



  • Factors that contribute to a successful business location include:
  • The type of businesses in the area
  • The condition of the streets and buildings
  • The cost of property
  • The location of competition
  • The location of your customers
  • To compete successfully, you must be familiar with your competitor’s product or service
  • You must also produce a better product than your competitors
  • Poor management is one of the main reasons for business failure
exit ticket
Exit Ticket
  • 1. Name the four ways to become a business owner. Which one would you choose? Why?
  • 2. Explain the differences between a partnership and a corporation

3. Describe one of the documents you would need to prepare to apply for a business loan.