Post on 23-Mar-2016
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Business Ownership & Operations
Section 6
soleproprietorship
a business owned by one person
partnershipa business owned by two or more people who share its risks and rewards
corporationa company that is registered by a state and operates apart from its owners
cooperativean organization that is owned and operated by its members
nonprofitorganization
a type of business that focuses on providing service, not on making a profit
franchise
a contractual agreement to use the name and sell the products or services of a company in a designated geographic area
Sole Proprietorship, Corporation, and Partnership
Advantages of Sole Proprietorships
Easy to start Proprietors are in charge
Proprietors keepall the profits
Taxes are lowerthan a corporation’s
A major disadvantage of owning a sole proprietorship is that the owner has unlimited liability.
unlimited liabilitywhen the owner is responsible for the company’s debts
Other Disadvantages of Sole Proprietorships
Limited accessto credit
Many run outof money
The owner may not have the necessary
skills
The business endswhen the owner dies
To start a partnership, you need a partnership agreement.
Advantages of Partnerships
Easy to start
Easier toobtain capital
Easier toobtain credit
Not dependent on a sole person
Only taxed once
Diversity in skills
Disadvantages of Partnerships
Business risk is shared
Unlimited legal and financial
liability is shared
If one partner makes a
mistake, all partners are responsible
To form a corporation, the owners must get a corporate charter from the state where their main
office will be located.
Advantages of Corporations
Limited liabilityAbility to raise
money byselling stock
Business doesnot end when
anowner dies
Disadvantages of Corporations
Double taxationMore
governmentregulation
Difficult andcostly to start
1. Income is taxed.2. Stockholders pay taxes
on profits issued to them
Functions of Businessproducer a business that gathers raw goods
(timber, dairy, crops)
processora business that changes raw materials into more finished products (oil into gasoline, canned food)
manufacturer a business that makes finished products out of processed goods (cars, computers)
Functions of Business
intermediarya business that moves goods from one business to another (distributor of paper products)
wholesaler a business that distributes goods in bulk quantities to other businesses (clothing manufacturer)
retailer
a business that purchases goods from a wholesaler and sells them to consumers, the final buyer of the goods (Wal-Mart)
productionthe process of creating, expanding, manufacturing, or improving goods and services
procurementthe buying and reselling of goods that have already been produced
marketingthe process of planning, pricing, promoting, selling, and distributing ideas, goods, and services
management
the process of achieving company goals by planning, organizing, directing, controlling, and evaluating the effective use of resources
finance the business or art of money management
accounting
maintaining and checking records, handling bills, and preparing financial reports for a business
Types of Businesses
Functions ofBusinesses
• Producers• Processors• Manufactures• Intermediaries and
Wholesalers• Retailers and Service
Businesses
• Production and Procurement
• Marketing• Management• Finance and
Accounting
In the U.S.A., service businesses employ about three-quarters of the workforce and are rapidly increasing in numbers.