Types of Business
Ownership
Section 6.1
Objectives
► 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.
Why do you think there is so much
variation in the sizes and forms of
businesses?
Why do you think there is so much variation
in the sizes and forms of businesses?
► Size and form of business will depend on the
goods and services that it produces
Why does an entrepreneur need to know
about different types of ownership?
Organizing a business
► There are three main types of business organizations:
❖ Sole prietorships
❖ Partnerships
❖ Corporations
► As a part of the business plan, entrepreneurs must decode
which type fits best their situation
► Later on the type of business can change as the business
grows
Sole proprietorships
► A business owned by one person
► Unlimited Liability: the
owner is responsible for the
company’s debts. If the
owner has more debt than
their income, he has to
make up this difference
Partnership
► A business owned by two or more people who share its risks and
rewards
► To start a partnership, you need a partnership agreement, which is
a contract that outlines the rights and responsibilities of each
partner
Corporations
► A company that is registered by a state and operates apart from its
owners
► To form this corporation, the owners must get a charter from the
state where their main office is located
► A corporate charter is a license
► To raise money, the owner may sell stock or shares
► The company must also have a board of directors who will govern the
corporation
Corporations
► Limited Liability holds a firm’s owners responsible for no
money that the capital that they have invested in it
Other ways to organize a Business
► A Cooperative is an organization that is
owned and operated by its members
► When groups of businesses, such as small
farms pool their resources, they form a
cooperative
► The purpose is to save money on the
purchase of certain goods and service
► A cooperative may take marketing for
goods and services more efficient and
profitable
Other ways to organize a Business
► A nonprofit Organization is a type of organization that focuses on
providing a service but not to make a profit
► Taxes???
Other ways to organize a Business
► Franchise is a contractual agreement to use the name and
sell the products or services of a company in a designated
geographical area
► Fast Food Restaurants
