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Business Ownership and Business Ownership and OperationsOperations

Chapter 6Chapter 6 pp. 84-97pp. 84-97

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continued

Learning ObjectivesLearning Objectives

NameName the three forms of business ownership.

CompareCompare the types of ownership. DescribeDescribe alternative ways to do

business. IdentifyIdentify the different types of

businesses.

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.

Why it’s ImportantWhy it’s Important

You need to understand business ownerships and operations before starting a business

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Types of Business Types of Business Ownership Ownership

1. The three different ways you can own a business are:

Sole proprietorship Partnership Incorporation

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Sole ProprietorshipSole Proprietorship

2. A ____________________ is a business owned by only ________person.

Sole proprietorship

one

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Sole Proprietorship Sole Proprietorship AdvantagesAdvantages

3. The advantages to having your own 3. The advantages to having your own business are: 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 Sole Proprietorship DisadvantagesDisadvantages

4. The disadvantages to having your own business are:

• You have to pay for _______________

• You might have to use your __________________ or ____________

from the bank

• You might lack _____________________

Everything yourself

Personal savings Borrow money

Business skills

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Sole Proprietorship Sole Proprietorship DisadvantagesDisadvantages

5. A serious disadvantage to owning a sole proprietorship is that you have ____________________, or ____________________________

________________.

Unlimited liability

Full responsibility for your company’s debts

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PartnershipPartnership

6. A _____________ is a business owned by ____________________ who share the risks and rewards.

7. To start a partnership you need to draw up a _______________________, which is a ____________________________

partnershipTwo or more persons

Partnership agreementContract that outlines the rights and responsibilities of each partner

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continued

Partnership AdvantagesPartnership Advantages

8. The advantages to partnership are:

You might need only a __________ to start and have to ______________ only on your ___________________.

Each of your partners _______________ ____________ to start the business.

licensepay taxes

personal profits.

can contributemoney

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• .

Partnership AdvantagesPartnership Advantages

Banks are often more willing to lend money to _______________________________.

Your partners can _________________ to the business

partnerships than sole proprietorships

bring difference skills

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Partnership Partnership DisadvantagesDisadvantages9. The disadvantages to partnership are:

You not only _______________ with your partners, you also______________________

You might not ______________ with your partners.

You share ____________________________ with your partners.

Share the risksShare the profits

get along

Unlimited legal and financial liability

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Graphic OrganizerGraphic OrganizerSimilarities and Differences BetweenSimilarities and Differences Between

Partnerships and Sole ProprietorshipsPartnerships and Sole Proprietorships

Increased diversity of experience

Shared losses

Combined

funds

BothBoth

Pride in owning and

running business

Easy to set up

Low taxes

Unlimited liability for debts

Huge time demands

Quicker decision- making

Owner keeps all profits

Owner is own boss

Relatively easy to get credit

PartnershipsPartnerships Sole ProprietorshipsSole Proprietorships

Shared decision- making

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CorporationCorporation

10. A _________________ is a business owned by many people but treated by __________________________.

corporation

law as one person

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CorporationCorporation

11. To form a corporation, you need to get ______________________a from the _______________ your headquarters is in.

corporate charter state

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CorporationCorporation12. To raise money, you can sell

____________, or ___________________________________.

13. For each share of common stock, the stockholder gets a __________________ and __________ on how the business is run.

14. You also must have a ________________ who control the corporation.

stockshares of ownership in your corporation

share of the profitsa vote

board of directors

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Corporation AdvantagesCorporation Advantages

15. A major advantage of a corporation is its _________________________.

16. If your company loses money, the ________________________________

17.Another advantage is that the corporation

__________________________________

limited liability

stockholders lose only what they invested

doesn’t end if the owners sell their shares

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Corporation Corporation DisadvantageDisadvantage18. A disadvantage of a corporation is that

you often have to ________________.

19. The _________________________ corporations.

20. It is __________________________ than a sole proprietorship or a partnership and running a corporation can be much more complicated.

pay more taxes

Government closely regulates

more difficult to start a corporation

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Figure6.1 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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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?

Easy to start, you can be your own boss, you keep all the profits, and you pay taxes only once on the income from the business

sole proprietorship is owned by one person and a partnership is owned by two or more people

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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?

All other partners share responsibility of a bad decision

It’s more complex to start, it’s more closely regulated by the government, it’s more complicated to run, and you pay more taxes.

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Alternative Ways to Do Alternative Ways to Do BusinessBusiness

21. Franchises, cooperatives, and nonprofit organizations offer you ____________________ to do business. other ways

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FranchiseFranchise

22.A ____________________________ ________________________________

___________________________in a designated geographic area.

products or services

franchise is a contractualagreement to sell a company’s

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FranchiseFranchise23. To run a franchise you have to

_______________________________________ or __________________________

24. In return, the franchisor offers a __________________________________.

25. You can ________________________ yourself, as a sole proprietor, as a partnership with someone else, or even as a corporation.

Invest money and pay the franchisor an annual feea share of the profits

well-known name and a business plan

can operate a franchise

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Franchise AdvantageFranchise Advantage

26. An advantage of opening a franchise is that it’s ___________________.

27. The __________________________ can be a _________________ for customers.

easy to start

name of the parent companybig draw

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Franchise DisadvantageFranchise Disadvantage

28. 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 OrganizationNonprofit Organization

29. A ________________________ is a type of business that focuses on providing a service rather than making a profit.

30.Like a corporation, a nonprofit organization has to _______________

___________________ and might be run by a board of directors.

nonprofit organization

register withthe government

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Nonprofit OrganizationNonprofit Organization

31. Because it doesn’t make a profit, a nonprofit organization _____________

______________________

32. Donors ___________ receive dividends like investors, but they can _______________________________

doesn’t have topay taxes

don’t

deduct their donations from their taxes

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CooperativeCooperative

33. A ________________ is an organization ________________________________ for the purpose of saving money on the purchase of certain goods and services.

cooperative

owned and operated by its members

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CooperativeCooperative

34.A cooperative is like a corporation in that it ________________________ from the individual businesses.

35. A ___________________________ and choose a board of directors to run it.

exists as a separate entity

cooperative can sell stock

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CooperativeCooperative

36.Cooperatives can save money by _______________________________

__________________________.

37. Cooperatives ___________________ than regular corporations do.

buying insurance, supplies and advertising as a group

pay less taxes

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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?

Fast-Food (McDonald’s, Rita’s), photocopy services (Mailboxes etc.)

Management training, advertising, and a system of operations

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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?

They are alike because both needs to register with the government and might be run by a board of directors. Unlike in that it doesn’t pay taxes and gets money through grants and donations

pool resources and save money as group

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continued

Types of BusinessesTypes of Businesses

38. One way to classify businesses is to group them by the kind of products they provide:

Producing raw goods Processing raw goods Manufacturing goods from raw or processed

goods Distributing goods Providing services

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ProducersProducers

39. A ___________________is a business that gathers __________________ in their natural state.

40. ___________________ are materials gathered in their original state from _____________________ such as land and water.

producerraw products

Raw materials

natural resources

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ProcessorsProcessors

41. ______________ change raw materials into ____________________.

42. Processed goods :

Processorsmore finished products

are made from raw goods and may require further processing.

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ManufacturersManufacturers

43. _____________________ are businesses that make _______________ out of processed goods.

44. The finished products ________________________________

_________________________________.

Manufacturersfinished products

need no further processing and are ready for market.

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IntermediariesIntermediaries

45. An _________________is a business that moves goods from one business to another.

46. It buys goods, ___________________

__________________________________

intermediary

stores them, and then resells them

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IntermediariesIntermediaries

47. A _________________ also known as a distributor, distributes goods. This is one type of intermediary

48. Wholesalers ___________________________ and resell them in _______________ to their customers, usually other companies.

wholesaler

buy goods from manufacturers in huge quantities

smaller quantities

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RetailerRetailer

49. A _______________ purchases goods from a wholesaler and resells them to the ________________________________

________________________.

retailer

consumer, or the final buyer of the goods

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Service BusinessesService Businesses

50. Service businesses _________________ rather than goods.

51. Services _____________________ ___________________,

such as hairstyling and car repair.

provide services

are the products of a skill or an activity

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Service BusinessesService Businesses

52. Some service businesses ________________, such as medical clinics and law firms.

53. Some _________________________, such as taxi companies and copy shops.

meet needs

provide conveniences

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Fast Review

1. What is the difference between a producer and a processor?

2. Describe the activities performed by businesses.

producer – gathers or create raw products. processor – changes raw products into more finished products.

Activities include producing, processing, manufacturing, and distributing goods and providing services.

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Fast Review

3. What does an intermediary do?

4. Give examples of service businesses.

•moves products between businesses and the public

hairstylists, car repair shops, law firms, newspapers, internet services

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What’s the aim of joining forces andstarting an organization?

What’s the benefit of going into business for yourself?

continued

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Can a business have a contractual agreement with its customers?

pp. 84-97

End ofChapter 6 Business Ownershipand Operations

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Key WordsKey Words

sole proprietorshipunlimited liabilitypartnershipcorporationstocklimited liabilityfranchise continued

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Key WordsKey Words

nonprofit organizationcooperativeproducerprocessorsmanufacturersintermediary

continued

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Key WordsKey Words

wholesalerretailer

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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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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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Compaq Computers and Cisco Systems don’t build their own products anymore. These companies rely on Flextronics, a company that specializes in manufacturing electronics, to build their equipment.

continued

Manufacturing Products

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This allows Compaq and Cisco to focus on creating new products. Flextronics has grown into a global contractor that produces $10.5 billion a year in electronic gizmos.

continued

Manufacturing Products

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What do Compaq Computers and Cisco Systems give up when they rely on an outside manufacturer?

Analyze