After completing this chapter you will be able to:

1. Name business ownerships

2. Compare the ownerships

3. Describe alternative ways to do business

4. Identify types of business

You need to understand business ownerships and operations before starting a business.

•Sole Proprietorship- a business owner by one person•Unlimited Liability- full responsibility for a company’s debts•Partnership- business owned by two or more people•Corporation- business owned by many people but treated by law as one person•Stock- shares of ownership in a corporation•Limited Liability- stockholders only lose what they invested•Franchise- a contractual agreement to sell a company’s products and/or services in a designated geographic area

• Nonprofit Organization- a business that focuses on providing a service rather than making profit

• Cooperative- organization owned and operated to save money on the purchase on goods and/or services

• Producer- business that gathers raw products in their natural state

• Processors- change raw materials into more finished goods

• Intermediary- business that moves goods from one business to another

• Wholesaler- aka a distributor, distributes goods• Retailer- purchases goods from a wholesaler and sells

them to the customer

•A sole proprietorship is a business owned by only one person.

•Advantages of a sole proprietorship include:

1. easy to start

2. be your own boss

3. keep all profit

•Disadvantages are:

1. pay for all expenses

2. lack of business skills

3. unlimited liability

*The greatest disadvantage is unlimited liability.

•A partnership is a business owned by two or more people.

•To start a partnership you need to draw up a partnership agreement.

•Advantages of a partnership are:

1. easy to start

2. easy to obtain capital

3. partners bring different skills to the business

•Disadvantages are:

1. you share risks and profits with your partner

2. partner can leave partnership and business is ruined

3. you share unlimited legal and financial responsibility

•A corporation is a business owned by many people but treated by law as one.

•To form a corporation you need a corporate charter.

•A corporation sells stock (shares of owner ship) to raise money.

•A major advantage is limited liability.

•A disadvantage is that you often pay more taxes.

•A franchise is a contractual agreement to sell a company’s products or services.

•To run a franchise you have to invest money and pay the franchisor an annual fee.

•An advantage of a franchise is that it is easy to start.

•A disadvantage is that the franchisor is often very strict on how the business is run.

*If you want to start a business but lack the business know-how, you will want to choose a franchise

•A nonprofit organization is a business that focuses in providing a service rather than making profit.

•It has to register with the government and might be run by a board of directors.

•It doesn’t have to pay taxes.

•Instead of investors, nonprofit organizations rely on government grants and donations.

•A cooperative is an organization that is owned and operated by its members for the purpose of saving money on the purchase of certain goods and services.

•You need a government charter to start one.

•It can sell stock and have a board of directors.

•They pay less in taxes

*Examples of cooperatives are Ace Hardware and Welch’s