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Understand Types of Business Ownership

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by

Casey Sutton

on 23 April 2014

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Transcript of Understand Types of Business Ownership

The journey to starting your own business.
Understand the types of business ownership.
Types of Businesses
Quiz Friday on 2.01
Sole Proprietorship

Partnership

Corporation

Cooperative

Franchise
A corporation is
formed
by filing of an article of incorporation with state government. The business must create corporate bylaws, name a board of directors, and issue shares of stock. In North Carolina, the business must choose a name, choose board of directors, file articles of incorporation, create bylaws, hold a meeting, issue stock, obtain licenses, determine tax obligations, and open a bank account for the business.
Cooperatives
are formed by a group of individuals or businesses to serve their needs in order to gain bargaining power against bigger businesses. It allows for goods or services to be purchased at a lower price as a group and is owned by the members of the cooperative.
Create a third Wordle with 25 words and/or phrases describing a corporation. Save it the same way as your other two Wordles.
Sole Proprietorship
A sole proprietorship is owned and operated by one person. Although they may have additional employees, they are the sole owner and decision-maker.
Advantages
Easy to form
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In NC, register your business name and then get appropriate license and permits.

Complete control of business
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You get to make all the decisions!

Recipient of 100% of the profit
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You make all that MoNeY HoNeY!

One time taxation
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Your profit is only taxed ONCE!
Disadvantages
Limited Capital
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You only have your own money and capital to invest in opening the business.

Unlimited Liability
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You can lose more than you

invested. If the business goes down... you're going down with it!

Limited Life
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When you die, the business dies. If you retire, the sole proprietorship retires.
Funding a sole proprietorship requires a personal investment, gift or a loan from a bank or individual.

A sole proprietorship is terminated when the owner decides to leave the business OR the owner dies.
Partnership
A
partnership

is
an association of
two or more people
to carry on as
co-owners of a business
for profit.
Advantages
Kinda easy to form...
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You follow the same steps as opening a sole proprietorship, but you must also sign a partnership agreement.

More capital and credit available
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You have someone to split the cost of opening the business with! Whoop whoop.

Split workload
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You have another partner to help carry to workload, so you don't have to work as much.

Shared Losses

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If the business goes down, you have someone else to help cover the losses.
Disadvantages
Shared Outcome
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You share the risk, then you share the rewards. You share profits and decision-making capabilities.

Unlimited Liability
-->

You can lose more than you

invested. If the business goes down... you're going down with it!

Limited Life
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When you or the partner dies or chooses to leave the business, the partnership dissolves.
How a partnership is operated must be decided on by the partners.
Corporation
A corporation is
owned
by stockholders who have purchased shares, or a "piece" of the company. Each share owned is equivalent to one vote.
A corporation is
managed
by a board of directors who oversee the day to day operations.
Do your research. Find 3 well-known corporations and the date they went public.
Take Two!
Disadvantages

Double taxation: profits and earnings

Subject to more laws than other types of ownership

More difficult to form

Operations controlled by shareholders and board of directors instead of original owner(s)
Advantages

Capital easy to obtain

Limited liability for shareholders

Can invest without having to manage day-to-day operations

Possibility of unlimited lifetime of business
Decision-making is shared
Corporation may have unlimited life. This must be determined by charter or articles of dissolution, and must be approved by the majority of the board of directors and/or stockholders (shareholders)
Cooperatives and Franchises
A franchise grants permission to sell products and services to another business.

Why would an individual choose franchise as a form of business?

It offers brand/product recognition and a proven format of business that is successful.
How does this help small businesses?

Take Two!
Full transcript