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SBModule2

Types of Ownership

QuestionAnswer
Sole proprietorship A business owned and operated by one person; the easiest and most popular form of business ownership.
Partnership A form of business ownership in which two or more people share the assets, liabilities, and profits.
General partnership A partnership in which all partners have unlimited personal liability and take full responsibility for the management of the business.
Limited partnership A partnership in which the partners’ liability is limited to their investment.
Joint venture A partnership in which two companies join to complete a specific project. The partnership ends after a specified period of time.
Strategic alliance A partnership in which two businesses work together for mutual benefit. (Example: A business forms a partnership with a manufacturer that agrees to produce the business’s products.)
Corporation A business that is chartered by a state and legally operates apart from its owners.
C-corporation The most common form of corporation. It protects the entrepreneur from being personally sued for the actions and debts of the corporation.
Subchapter S corporation A corporation that is taxed like a sole proprietorship or partnership.
Nonprofit corporation Legal entities that make money for reasons other than the owner’s profit. (Examples: churches, charities, education foundations, trade associations)
Limited Liability Company (LLC) A new form of business ownership that provides tax advantages and limited liability. (Examples: law and medical firms)
Franchise A legal agreement that gives an individual the right to market a company’s products or services in a particular area.
Franchisee A person who purchases a franchise agreement.
Franchisor The person or company who sells a franchise.
Initial franchise fee The fee the franchise owner pays in return for the right to run the business.
Advantages of a Sole Proprietorship (1)easy and inexpensive to create. (2)The owner has complete authority over all business decisions and activities. (3)owner receives all profits. (4) least regulated form of business ownership. (5) Taxes are paid as personal income of the owner
Disadvantages of a Sole Proprietorship (1)owner has unlimited liability for all debts and actions of the business. (2) difficult to raise capital(3)A sole proprietor is limited by his/her skills and abilities.(4)The death of the owner automatically dissolves the business.
Advantages of a Partnership (1)Partnerships allow for shared decision-making and management responsibilities. (2)It is easier to raise capital than in a sole proprietorship. (3)There are few government regulations. (4)All partners share business losses.
Disadvantages of a Partnership (1)Partnerships may lead to disagreements. (2)Some entrepreneurs are not willing to share responsibilities and profits. (3)Some entrepreneurs fear being held legally liable for the error of their partners. (4)Each owner has unlimited liability.
Advantages of a Corporation (1) can raise money by issuing shares of stock. (2) offers its owners limited liability. (3)People can easily enter or leave the business by buying or selling their shares of stock. (4)can hire experts to manage each aspect of the business.
Disadvantages of a Corporation (1)Legal assistance is needed to start (2)Start-up can be costly. (3)Corporations are subject to more government regulations than partnerships or sole proprietorships. (4)Much paperwork is involved in running a corporation. (5)Income is taxed twice.
Advantages of Buying An Existing Business (1)The existing business already has customers, suppliers, and procedures. (2)The seller of the business may be willing to train the new owner. (3)There are existing financial records. (4)Financial arrangements may be easier.
Disadvantages of Buying an Existing Business (1)The business may be for sale because it is not making a profit. (2)Problems may be inherited with the purchase of an existing business. (3)Many entrepreneurs may not have the capital needed to purchase an existing business.
Advantages of Entering a Family Business (1)There is a certain sense of pride and accomplishment that comes from being part of a family endeavor. (2)can remain in the family for generations. (3) enjoy working with relatives. (4)knowing that your efforts are helping those whom they care about.
Disadvantages of Entering a Family Business (1)Management positions are held by family members who aren't qualified.(2) hard to retain employees who are not family members.(3)Family politics may affect decisions (4) hard to separate business and private life (5)hard to set policies and procedures
Advantages of Purchasing a Franchise Business (1)An established product or service is being provided. (2)Franchisors often offer management, technical, and other assistance. (3)Equipment and supplies may be less expensive. (4)A guarantee of consistency attracts customers.
Disadvantages of Purchasing a Franchise Business (1)The cost may be high and reduce profits. (2)owners are limited in the decisions they can make regarding the business. (3)The performance of other franchises impact on the franchisee. (4)The franchise agreement may be terminated by the franchisor.
Created by: mrsljohnson
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