 Section 6.1 – Types of Business Ownership › Describe the advantages and disadvantages of the three major forms of business organizations › Describe how cooperatives and nonprofits are like and unlike corporations and franchises

 Sole Proprietorship › A business owned by one person. Three quarters of all businesses in the U. S. take this form of organization › Advantages:      Easy to do (licenses/permits) In charge of their business Can make all of the decisions Can keep all of the profits Usually have lower taxes (taxed once) 6-1

› Disadvantages:  Unlimited liability  The owner is responsible for the company’s debt’s. If the owner has more debt than they receive, the owner has to make up the difference.

 Partnership › A business owned by two or more people who share its risks and rewards.

› Advantages:      Easy to start Easier to obtain capital Banks are often more willing to lend money Taxed only once Each partner brings specific skills and talents

 › Disadvantages    All of the partners share the risk Problems with partners getting along Unlimited Liability Corporation › Company that is registered by a state and operates apart from its owners › To raise money, the owners can sell stock or shares of the company

› › Advantages    Limited Liability  Holds a firms owners responsible for no more than the capital that they have invested in it.

Ability to raise money by selling stock Company does not end if an owner dies Disadvantages    Double taxes Extra governmental restrictions More difficult and costly to start

 Other ways to Organize a Business ›

Cooperative

 An organization that is owned and operated by its members › ›   When a group of businesses pool their resources Purpose – to save money on the purchase of certain goods and services Ex. Ocean Spray

Nonprofit Organization

 Type of organization that focuses on a providing a service, but not to make a profit.

 Must register with the government. Because they do not make a profit they do not pay taxes. Ex. Churches

Franchise

 A contractual agreement to use the name and sell the products or services of a company in a designated area 

Ex. McDonalds, Tim Horton’s

 You have to invest money and pay franchise fees or share the profits.

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What is the difference between a sole proprietorship and a partnership?

If a partner makes a bad decision, what responsibility do the other partners have?

Why are cooperatives formed?

Compare limited liability and unlimited liability.

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 Section 6.2 – Types and Functions of Businesses › Differentiate the six types of businesses › › Describe the five functions of business Discuss how the five functions of business relate to each other

 Types of Business › Producers › ›   Business that gathers raw goods Agriculture, mining, fishing, and forestry Processors  Changes raw materials into more finished products   Made from raw goods that require further processing Crude oil to gasoline, iron ore into steel Manufacturers  Makes finished products out of processed goods  Cars, CD’s, Computers 6-2

  Intermediaries and Wholesalers › Intermediary – A business that moves goods from one business to another ›  Buys goods, stores them and resells them Wholesaler – Distributes goods Retailers and Service Businesses › Retailer – Purchases goods from wholesaler and sells them to consumer › Record stores and auto dealers

 Functions of Business › › Production and Procurement  Production – Process of creating, expanding, manufacturing or improving goods and services  Procurement – The buying and reselling of goods that have already been produced.

Marketing   Process of planning, pricing, promoting, selling and distributing ideas, goods, and services Getting consumers to buy the product

› › Management  The process of achieving company goals by planning, organizing, directing, controlling and evaluating the effective use of resources.

Finance and Accounting  Finance – The business or art of money management  Requires analyzing financial statements to make future decisions  Accounting – Maintaining and checking records, handling bills and preparing financial reports for a business.

   What is the difference between a producer and a processor?

Identify the five functions of business.

Give an example of how the accounting and finance functions can affect a business’s marketing and production processes.