Section 6.1 – Types of Business Ownership › Describe the advantages and disadvantages of the...
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Transcript of Section 6.1 – Types of Business Ownership › Describe the advantages and disadvantages of the...
Business Ownership and Operations
Intro To BusinessChapter 6
Learning Targets
Section 6.1 – Types of Business Ownership› 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
6-1
Types of Business Ownership
Sole Proprietorship› A business owned by one person. Three-
quarters of all businesses in the U. S. take this form of organization
› Advantages: Easy to do (licenses/permits) In charge of their business Can make all of the decisions Can keep all of the profits Usually have lower taxes (taxed once)
Types of Business Ownership› Disadvantages:
Unlimited liability The owner is responsible for the company’s debt’s.
If the owner has more debt than they receive, the owner has to make up the difference.
Types of Business Ownership
Partnership› A business owned by two or more people
who share its risks and rewards.› Advantages:
Easy to start Easier to obtain capital Banks are often more willing to lend money Taxed only once Each partner brings specific skills and talents
Types of Business Ownership› Disadvantages
All of the partners share the risk Problems with partners getting along Unlimited Liability
Corporation› Company that is registered by a state and
operates apart from its owners› To raise money, the owners can sell stock
or shares of the company
Types of Business Ownership› Advantages
Limited Liability Holds a firms owners responsible for no more than
the capital that they have invested in it. Ability to raise money by selling stock Company does not end if an owner dies
› Disadvantages Double taxes Extra governmental restrictions More difficult and costly to start
6-1
Types of Business Ownership
Other ways to Organize a Business› Cooperative
An organization that is owned and operated by its members When a group of businesses pool their resources Purpose – to save money on the purchase of certain goods and
services Ex. Ocean Spray› Nonprofit Organization
Type of organization that focuses on a providing a service, but not to make a profit.
Must register with the government. Because they do not make a profit they do not pay taxes. Ex. Churches
› Franchise A contractual agreement to use the name and sell the products or
services of a company in a designated area Ex. McDonalds, Tim Horton’s You have to invest money and pay franchise fees or share the
profits.
6-1
Questions/Reflection
1. What is the difference between a sole proprietorship and a partnership?
2. If a partner makes a bad decision, what responsibility do the other partners have?
3. Why are cooperatives formed?4. Compare limited liability and unlimited
liability.
Learning Targets
Section 6.2 – Types and Functions of Businesses› Differentiate the six types of businesses› Describe the five functions of business› Discuss how the five functions of business
relate to each other
6-2
Types and Functions of Businesses
Types of Business› Producers
Business that gathers raw goods Agriculture, mining, fishing, and forestry
› Processors Changes raw materials into more finished products Made from raw goods that require further
processing Crude oil to gasoline, iron ore into steel
› Manufacturers Makes finished products out of processed goods Cars, CD’s, Computers
Types and Functions of Businesses
Intermediaries and Wholesalers› Intermediary – A business that moves
goods from one business to another Buys goods, stores them and resells them
› Wholesaler – Distributes goods Retailers and Service Businesses
› Retailer – Purchases goods from wholesaler and sells them to consumer
› Record stores and auto dealers
Types and Functions of Businesses
Functions of Business› Production and Procurement
Production – Process of creating, expanding, manufacturing or improving goods and services
Procurement – The buying and reselling of goods that have already been produced.
› Marketing Process of planning, pricing, promoting, selling
and distributing ideas, goods, and services Getting consumers to buy the product
Types and Functions of Businesses› Management
The process of achieving company goals by planning, organizing, directing, controlling and evaluating the effective use of resources.
› Finance and Accounting Finance – The business or art of money
management Requires analyzing financial statements to make
future decisions Accounting – Maintaining and checking
records, handling bills and preparing financial reports for a business.
Questions
What is the difference between a producer and a processor?
Identify the five functions of business. Give an example of how the accounting
and finance functions can affect a business’s marketing and production processes.