Commercial Public Nonprofit 3 basic forms: Sole proprietor Partnerships Corporations ...
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Transcript of Commercial Public Nonprofit 3 basic forms: Sole proprietor Partnerships Corporations ...
Recreation Systems
The 3 Sectors
CommercialPublic
Nonprofit
Commercial Sector
3 basic forms:
Sole proprietor
Partnerships
Corporations
Franchises
Sole Proprietor
One owner
Unlimited liability
Personally held liable for any debt
or legal problems
Can lose an unlimited amount of
money
Sue business & owner
Advantages & disadvantages….
Sole Proprietorship
Advantages DisadvantagesTotal control over decision making Limited managerial experience
Revenues taxed only once (corporate tax exempt)
Unlimited personal liability
Great flexibility Limited access to capital funds
Easy to form Investors will not invest in SP
All profits retained by owner 80% fail
Easy to sell
Partnership
Two or more entities
Least popular form of ownership
Have written agreement of each owners’ responsibilities
4 types of partners….
4 forms of Partnerships
1. General Partnership
Common form of partnership
Each partner is fully responsible for liabilities
Share the costs & benefits of the business
4 forms of Partnerships
2. Limited Partnership Also, very common
One or more partners can be limited
One partner must not be a limited partner, but GP
Limited partner has limited authority
Liability based on amount of capital invested
Names of limited partners not in name
4 forms of Partnerships
3. Secret partner
Identity of an owner is unknown to the public
Negative business history Simply doesn’t want to be known
Secret partner can participate in management but has limited financial responsibility based on investment
4 forms of Partnerships
4. Dormant partner (silent partner)
Invests only money
Not involved in management of the organization
Liable only for the amount of his/her investment
Mix of partnerships & company Owners are called members rather
than shareholders Taxed as a partnership
(as income for individual) Has limited liability of a company Easier to form than C or S Corp Dissolves when a member dies or
wants out
LLC & LLP
Partnership
Advantages DisadvantagesSome control over decision making
Limited managerial experience
Revenues taxed only once (corporate tax exempt)
Joint unlimited liability (except LLC & LLP)
Great flexibility Limited access to capital funds
Easy to form When partnership dissolves, entire business must be liquidated
All profits retained by owner Partners must get permission from others to leave business
Easy to sell
C Corporations
S Corporations
Franchises
Corporations
C Corporations
Seen as a fictional, legal person & can…. Own, manage, & sell property Sign binding contracts Sue & be sued Pay corporation taxes
20% of all businesses & 80% of ave. annual sales
Owners are shareholders Limited liability up to amt of investment Run by a board of directors representing the shareholders
S Corporations Like C Corporation in formation Distributes all profits so that the
corporation isn’t taxed Shareholders are taxed since they get
the profits Only form if ALL profits are distributed
$2 million in profits made, $1 million reinvested, taxed on $2 million
S Corporations
Corporations
Advantages DisadvantagesUnlimited life of corporation Complex formation process
Creditors can’t come after shareholders beyond their investment
Multitude of government regulations
Easy to transfer ownership – just sell stock
Double taxation
Obtain capital through selling stock or borrowing money using company assets as collateral
Financial records are public, privacy lost
Ability to hire broad base of talented managers
Franchises
Method of doing business, not ownership 1 co. grants another business right & license
3 Forms Trade name
True Value; Western Auto Product distribution
License to distribute product name, car dealers Pure Franchise
Complete business format Products, name, physical plant, marketing Restaurants, Discovery Zone, hotels
Franchise
Advantages DisadvantagesOwnership of a small business quickly
Freedom, limited by contract
Product & brand name Cost of initial franchise fee & royalty fees
Support from franchisor
Public Sector
Where do you find public sector parks & recreation agencies?
Public Sector
Tax supported
3 types Federal Agencies State Agencies Local Agencies
Local Parks & Recreation
Municipalities
Cities, townships,
counties, boroughs
Budget from the city…
what source?
Guided by several laws….
Local Parks & Recreation
Enabling laws State enables local gvts to acquire, develop,
maintain rec areas
Set parameters on: What types of gvts can operate rec agencies Authority of agency Fiscal practices Governing board Operational authority
Enables & not mandates
Local Parks & Recreation
Home Rule Legislation
Allows local gvts to control issues at local level without state interference
Power to buy, sell, lease property
Levy higher sales taxes
Utilize intergovernmental agreements
Change structure of government
Economic development practices
?????
What is the difference between a parks & recreation department
and a parks & recreation district?
Strengths & weaknesses of each?
Local Parks & Recreation Special District laws
Independent governing bodies
Direct taxing & bonding ability
20% of the 31,555 special districts in US relate to natural resources
9 states over 1000 special districts IL leads with 2,920….
Counties Municipalities Townships School Districts Special Rec Districts Fire Protection Highways Health Hospitals
Housing and Community Dev.
Libraries Drainage and Flood Control Irrigation, Water
Conservation Parks and Recreation Sewerage Water Supply Utilities Other Than Water Cemeteries Sewage and Water Supply
IL Special Districts
State Agencies
Est. thru state legislation
State parks & forests
State budget allocations
Focus: Outdoor rec, resource mgt, arts,
tourism IL Arts Council, IL Bureau of Tourism
Federal Agencies
Authority from congress
Fed p & r agency focus: Natural resources management Welfare of the people
Budget from congress
NPS, BLM, Historical & Cultural sites, VA, MWR
Nonprofit Sector
What are some characteristics of nonprofit organizations?
Nonprofit Agencies
Formally constituted for public benefit
Funded through fees, charges, donations &
grants
Private as opposed to governmental (NGO’s)
Not profit distributing, but can make a profit
Self-governing - boards
Nonprofit Agencies
Federal, sales & property tax exempt “Unrelated business income taxes”
Special postage rates Not all donations to npo are tax
exempt Exempt from labor unions Nonprofit Corporation…board
liability Types of nonprofits….
Nonprofit Agencies
Organization Mission Door County (WI) Sample orgs
501(c)(3) Religious, charitable, or educational & exist for public benefit
American Bowling Congress Inc; Door County Skate Inc; Little League Baseball, Inc; Peninsula Youth Soccer Association
501(c)(4) Civic leagues, social welfare organizations & local associations of employees
Four Seasons; Peninsula Golf Association Inc; Northern Door Volleyball Association Incorporated; Door County Rod & Gun Club Inc; Door Devils Motorcycle Club Inc
501(c)(7) Social clubs organized for recreation & other purposes for the benefit of its members
Door County Golf Association; Sturgeon Bay Yacht Club; Trilliun Quilt Guild
* 20+ nonprofit categories in the IRS code
Sector issues
Where do the three sectors get their funding?
What do they do with profits?
Nonprofit Issues
Sector/ Income Taxes Grants,
donations, sponsorship
s
Fees & Charges
Investment
Contractual
Commercial Sector
Pays them – property, income, sales
Minimal Major source
Major source
Can be a major source
NPO Doesn’t pay or receive
Major source
Major source
Limited, based on available cash
Growing importance
Public Sector
Essential
Growing importance
Major source
Limited, based on available cash
Growing importance
Commercial Owners, shareholders
NPO Back into agency
Public Into agency or back to city
Where do the profits go?