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THE FUTURE OF BUSINESS: The Essentials
Gitman & McDaniel
THE FUTURE OF BUSINESS: The Essentials
Gitman & McDaniel
Chapter4
Forms of Business OwnershipForms of Business Ownership
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Principles of Business Ownership
Financing?
Employees?
Business taxes?
Debt liability?
Operating control?
Ownership?
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SOLE PROPRIETORSHIPS1
a business owned by only one person
a business owned by only one person
Sole Proprietorship
Sole Proprietorship
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SOLE PROPRIETORSHIPS1
AdvantagesAdvantagesAdvantagesAdvantages
Easy and inexpensive to form
Profits go to the owner Direct control of the
business Freedom from
government regulations No special taxation Ease of dissolution
DisadvantagesDisadvantagesDisadvantagesDisadvantages
Unlimited liability Difficulty in raising
capital Limited managerial
expertise Trouble finding
qualified employees Personal time
commitment Unstable business life Losses are owner’s
responsibility
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PARTNERSHIPS2
a business owned by two or more people who share
its risks and rewards
a business owned by two or more people who share
its risks and rewardsPartnershipPartnership
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PARTNERSHIPS2
Ease of formation Availability of capital Diversity of skills and
expertise Flexibility No special taxes Relative freedom from
government control
Unlimited liability Potential for conflicts
between partners Sharing of profits Difficulty exiting or
dissolving
AdvantagesAdvantagesAdvantagesAdvantages DisadvantagesDisadvantagesDisadvantagesDisadvantages
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CORPORATIONS3
a company that is registered by a state and operates apart
from its owners
a company that is registered by a state and operates apart
from its owners
CorporationCorporation
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The Incorporation Process3
Select company’s nameSelect company’s name
Write articles of incorporationWrite articles of incorporation
Pay required fees and taxesPay required fees and taxes
Hold organizational meetingHold organizational meeting
Adopt bylaws, elect directors, pass operating resolutions
Adopt bylaws, elect directors, pass operating resolutions
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The Corporate Structure3
Stockholders
Directors
President VP Treasurer Secretary
Officers
Elect
Hire
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CORPORATIONS3
Limited liability Ease of transferring
ownership Unlimited life Tax deductions Ability to attract
financing
Double taxation of profits
Cost and complexityof formation
More government restrictions
AdvantagesAdvantagesAdvantagesAdvantages DisadvantagesDisadvantagesDisadvantagesDisadvantages
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Types of Corporations
C CorporationC Corporation Conventional or basic corporate form of organization
Conventional or basic corporate form of organization
S CorporationS CorporationA hybrid entity that is organized like a corporation, but taxed like a partnership
A hybrid entity that is organized like a corporation, but taxed like a partnership
Limited LiabilityCompany (LLC)Limited LiabilityCompany (LLC)
A hybrid organization that offers the same liability protection as a corporation but may be taxed as either a partnership or a corporation
A hybrid organization that offers the same liability protection as a corporation but may be taxed as either a partnership or a corporation
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4 Cooperatives
Legal entities formed by people with similar
interests, to reduce costsand gain economic power.
Legal entities formed by people with similar
interests, to reduce costsand gain economic power.
CooperativesCooperatives
SellerCooperatives
SellerCooperatives
Individual producers join togetherto compete more effectively withlarge producers
Individual producers join togetherto compete more effectively withlarge producers
Buyer Cooperatives
Buyer Cooperatives
A group of cooperative members who unite for combined purchasing power
A group of cooperative members who unite for combined purchasing power
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contractual agreement to use the name and sell the products or services of a company in a designated
geographic area
contractual agreement to use the name and sell the products or services of a company in a designated
geographic area
FranchisingFranchising
Franchising
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5 Franchises
Increased ability for franchisor to expand
Recognized name, product, and operating concept
Management training and assistance
Financial assistance
Loss of control Cost of franchising Restricted operating
freedom
AdvantagesAdvantagesAdvantagesAdvantages DisadvantagesDisadvantagesDisadvantagesDisadvantages
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5
A type of business thatfocuses on providinga service rather than
making a profit
A type of business thatfocuses on providinga service rather than
making a profit
Non-Profit Organization
Non-Profit Organization
Non-Profit
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