What are the 3 types of agribusinesses? Single (sole)
Proprietorship Partnership Corporation
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What 3 types of corporations are there? Subchapter C Regular
corporations Subchapter S Family Farms and Small Businesses
Subchapter 7 Cooperatives
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Single (Sole) Proprietorship Ownership One person Start Up
Costs Large amount of capital by owner Taxes Pay only once on the
income from the company Example Tractor Repair Shop
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Single (Sole) Proprietorship Liability Unlimited (personal and
business assets of owner) Responsibility for Decisions owner
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Single (Sole) Proprietorship Major Advantages Simple to start
Be your own boss Few government regulations Choose own products
& hours Pay taxes only once on income from company Receive all
profits
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Single (Sole) Proprietorship Major Disadvantages Limited
financial resources (capital needed to begin) Difficulty in
management Overwhelming time commitment Limited growth Restriction
of expansion potential Few fringe benefits
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Partnership Ownership General (all is shared) Start Up Costs
Shared by partners Taxes Income taxed only once Example Ag.
Machinery Dealership, Landscape Business
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Partnership Liability Shared in General Partnership but not
unlimited. Responsibility for Decisions Shared between partners in
a general partnership
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Partnership Major Advantages More financial resources Shared
management & pooled knowledge Longer survival Special skills of
partner Pay no taxes as a business Limited government
regulations
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Partnership Major Disadvantages Division of profits
Disagreement among partners Difficult to terminate Dissolved when
partner dies or leaves the partnership Divided management
authority
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Corporation Ownership Many people Start Up Costs From multiple
sources Taxes Business is taxed (double taxation) Example Phillip
Morris, Procter & Gamble, Kroger
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Corporation Liability Business only (not personal)
Responsibility for Decisions Board of Directors
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Corporation Major Advantages More money for investment
Perpetual life Ease of ownership change Draw talented employees
Separation of ownership from management Legal entity
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Corporation Major Disadvantages Initial cost Paperwork Two tax
returns (double taxation) Difficulty of termination Possible
conflict with board Must follow state laws Owners have limited
control
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Cooperative Ownership Owned & controlled by members Start
Up Costs Buy shares Taxes Most are exempt (if 50% of business with
members & profits returned in dividends) Example Land O Lakes,
Sunkist
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Cooperative Liability Members risk only the amount they have
invested Limited Responsibility for Decisions Each member gets one
vote
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Cooperative Major Advantages Continues at death of shareholders
Benefits go to members Share in direction of business Broad capital
base Special tax advantage Legal entity
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Cooperative Major Disadvantages Legal formalities Limited
control over business Expensive to form, maintain, & dissolve
Few persons may gain excessive power Lack of member
participation
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Franchise Ownership Buy Franchise name & products Start Up
Costs Large Start Up & Franchise Costs Taxes Business is taxed
Example McDonalds
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Franchise Liability Limited Responsibility for Decisions
Management (from above)
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Franchise Major Advantages Nationally recognized name &
reputation Help with finding a good location Management system with
successful track record Successful methods for inventory and
operations Financial advice & assistance Training for owners
& staff
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Franchise Major Disadvantages Additional costs for marketing
Monthly percentage of gross sales may go to parent company
Competition from other franchises Regulations: management, dcor,
selling, rules Coattail effects if other franchises fail
nationwide