Chapter 6

Report
Chapter
6
Business Ownership
and Operations
pp. 84-97
Chapter
6
Learning Objectives
After completing this chapter, you’ll be
able to:
1. Name the three forms of business
ownership.
2. Compare the types of ownership.
continued
Introduction to Business, Business Ownership and Operations
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Chapter
6
Learning Objectives
After completing this chapter, you’ll be
able to:
3. Describe alternative ways to do business.
4. Identify the different types of
businesses.
Introduction to Business, Business Ownership and Operations
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Why It’s Important
You need to understand business
ownerships and operations before
starting a business.
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6
Key Words
sole proprietorship
unlimited liability
partnership
corporation
stock
limited liability
franchise
Introduction to Business, Business Ownership and Operations
continued
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Chapter
6
Key Words
nonprofit organization
cooperative
producer
processors
manufacturers
intermediaries
continued
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Chapter
6
Key Words
wholesaler
retailer
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Types of Business Ownership
The three different ways you can own
a business are:
• Sole proprietorship
• Partnership
• Incorporation
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Sole Proprietorship
A sole proprietorship is a business
owned by only one person.
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Sole Proprietorship
The advantages to having your own
business are:
• It’s easy to start
• You get to be your own boss
• You get to keep all the profits
• The taxes are usually low
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Sole Proprietorship
The disadvantages to having your own
business are:
• You have to pay for everything
yourself
continued
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6
Sole Proprietorship
• You might have to use your personal
•
savings or borrow money from the
bank
You might lack business skills
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Sole Proprietorship
A serious disadvantage to owning a
sole proprietorship is that you have
unlimited liability, or full responsibility
for your company’s debts.
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Partnership
A partnership is a business owned by
two or more persons who share the
risks and rewards.
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Partnership
To start a partnership you need to
draw up a partnership agreement,
which is a contract that outlines the
rights and responsibilities of each
partner.
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Partnership
The advantages to partnership are:
• You might need only a license to
start and have to pay taxes only on
your personal profits.
• Each of your partners can contribute
money to start the business.
continued
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Chapter
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Partnership
• Banks are often more willing to lend
•
money to partnerships than sole
proprietorships.
Your partners can bring different
skills to the business.
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Partnership
The disadvantages to partnership are:
• You not only share the risks with
your partners, you also share the
profits.
continued
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6
Partnership
• You might not get along with your
partners.
• You share unlimited legal and
financial liability with your partners.
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6
Similarities and Differences Between
Graphic Organizer
Chapter
Partnerships and Sole Proprietorships
Both
Partnerships
Sole Proprietorships
Quicker
decision
Pride in
making
owning and
running business
Owner keeps
Increased
Easy to set up
all profits
diversity of
Low taxes
experience
Owner is
Unlimited liability
own boss
for debts
Shared losses
Relatively easy
Huge time
Combined
demands
to get credit
funds
Shared
decision
making
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6
Making an Ethical
Decision
1. What are the advantages and
disadvantages of “going solo” in a
business venture?
2. How can having a partner help launch and
grow a business? Are there any
drawbacks?
continued
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Chapter
6
Making an Ethical
Decision
3. Are you obligated to invite a person into a
partnership if that person was involved in
inventing a product you want to sell? What
if that person decided to start the business
without you?
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Corporation
A corporation is a business owned by
many people but treated by law as one
person.
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Corporation
To form a corporation, you need to get
a corporate charter from the state your
headquarters is in.
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Corporation
To raise money, you can sell stock, or
shares of ownership in your
corporation.
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Corporation
For each share of common stock, the
stockholder gets a share of the profits
and a vote on how the business is run.
You also must have a board of
directors who control the corporation.
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Corporation
A major advantage of a corporation is
its limited liability.
If your company loses money, the
stockholders lose only what they
invested.
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Corporation
Another advantage is that the
corporation doesn’t end if the owners
sell their shares.
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Corporation
A disadvantage of a corporation is that
you often have to pay more taxes.
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Corporation
The government closely regulates
corporations.
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Corporation
It is more difficult to start a corporation
than a sole proprietorship or a
partnership and running a corporation
can be much more complicated.
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Chapter
Figure
6.1
6
GENERATIONS OF FAMILY-OWNED BUSINESSES
Family-owned
businesses are
sometimes kept in the
family for more than
one generation.
What percentage of
families have had
their family-owned
businesses for two or
more generations?
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Chapter
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Fast Review
1. What are some of the advantages
of a sole proprietorship?
2. What is the difference between a
sole proprietorship and a
partnership?
continued
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Fast Review
3. If a partner makes a bad business
decision, what responsibility do the
other partners have?
4. What are the disadvantages of a
corporation?
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Alternative Ways to Do Business
Franchises, cooperatives, and
nonprofit organizations offer you other
ways to do business.
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Franchise
A franchise is a contractual
agreement to sell a company’s
products or services in a designated
geographic area.
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Franchise
To run a franchise you have to invest
money and pay the franchisor an
annual fee or a share of the profits.
In return, the franchisor offers a wellknown name and a business plan.
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Franchise
You can operate a franchise yourself,
as a sole proprietor, as a partnership
with someone else, or even as a
corporation.
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Franchise
An advantage of opening a franchise
is that it’s easy to start.
The name of the parent company can
be a big draw for customers.
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Franchise
The disadvantage of running a
franchise is that the franchisor is often
very strict about how the business is
run.
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Nonprofit Organization
A nonprofit organization is a type of
business that focuses on providing a
service rather than making a profit.
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Nonprofit Organization
Like a corporation, a nonprofit
organization has to register with the
government and might be run by a
board of directors.
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Nonprofit Organization
Because it doesn’t make a profit, a
nonprofit organization doesn’t have to
pay taxes.
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Nonprofit Organization
Donors don’t receive dividends like
investors, but they can deduct their
donations from their taxes.
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Cooperative
A cooperative is an organization
owned and operated by its members
for the purpose of saving money on
the purchase of certain goods and
services.
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Cooperative
A cooperative is like a corporation in
that it exists as a separate entity from
the individual businesses.
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Cooperative
A cooperative can sell stock and
choose a board of directors to run it.
Cooperatives pay less in taxes than
regular corporations do.
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Cooperative
Cooperatives can save money by
buying insurance, supplies, and
advertising as a group.
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Fast Review
1. What are some examples of
franchise businesses?
2. What types of assistance does the
franchisor give a franchisee?
continued
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Fast Review
3. How is a nonprofit organization like
and unlike a corporation?
4. What are some advantages of a
cooperative?
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Manufacturing Products
Compaq Computers and Cisco Systems don’t
build their own products anymore. These
companies rely on Flextonics, a company that
specializes in manufacturing electronics, to
build their equipment.
continued
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Manufacturing Products
This allows Compaq and Cisco to focus on
creating new products. Flextonics has grown
into a global contractor that produces $10.5
billion a year in electronic gizmos.
continued
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6
Analyze
What do Compaq Computers and Cisco
Systems give up when they rely on an outside
manufacturer?
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6
Types of Businesses
One way to classify businesses is to
group them by the kind of products
they provide:
• Producing raw goods
• Processing raw goods
continued
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Types of Businesses
• Manufacturing goods from raw or
processed goods
• Distributing goods
• Providing services
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Producers
A producer is a business that gathers
raw products in their natural state.
Raw goods are materials gathered in
their original state from natural
resources such as land and water.
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Processors
Processors change raw materials into
more finished products.
Processed goods are made from raw
goods and may require further
processing.
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Manufacturers
Manufacturers are businesses that
make finished products out of
processed goods.
The finished products need no further
processing and are ready for market.
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Intermediaries
An intermediary is a business that
moves goods from one business to
another.
It buys goods, stores them, and then
resells them.
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Intermediaries
A wholesaler, also known as a
distributor, distributes goods.
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Intermediaries
Wholesalers buy goods from
manufacturers in huge quantities and
resell them in smaller quantities to
their customers, usually other
companies.
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Intermediaries
A retailer purchases goods from a
wholesaler and resells them to the
consumer, or the final buyer of the
goods.
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Service Businesses
Service businesses provide services
rather than goods.
Services are the products of a skill or
an activity, such as hairstyling and car
repair.
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Service Businesses
Some service businesses meet needs,
such as medical clinics and law firms.
Some provide conveniences, such as
taxi companies and copy shops.
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Fast Review
1. What is the difference between a
producer and a processor?
2. What does a manufacturer do with
raw or processed goods?
continued
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Fast Review
3. What does an intermediary do?
4. Give examples of service
businesses.
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What’s the aim of joining forces and
starting an organization?
What’s the benefit of going into
business for yourself?
continued
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6
Can a business have a contractual
agreement with its customers?
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End of Chapter
6
Business Ownership and Operations

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