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Epf2d forms of business

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  • 1. Role of Producers & Consumers
    in a Market Economy
    EPF2d. Compare Forms of Business Ownership
  • 2. Essential question:
    What Are the characteristics of each form of business organization?
    2
  • 3. Forms of Ownership Facts:
    5 Forms of Ownership:
    Sole proprietorship
    Partnership
    Corporation
    Cooperative
    Franchise
    Most businesses in the US are sole proprietorships
    Corporations generate the most income
    3
  • 4. Essential question:
    What are the costs and benefits of each form of business?
    4
  • 5. SOLE PROPRIETORSHIP
    Benefits
    The owner makes all the decisions
    The owner keeps all the profits
    Costs
    The owner generally has limited financial resources
    The owner faces unlimited liability, which means if the company fails, the owner can lose personal assets along with business assets.
    5
  • 6. Partnership
    Benefits
    Owners make decisions
    Owners keep profits
    Owners share responsibilities – each has a unique set of skills and expertise
    Costs
    Owners face unlimited liability
    Owners have limited financial resources
    Potential conflict with partners
    6
  • 7. Corporation
    Benefits
    Able to accumulate sufficient financial capital to make large-scale investments and achieve economies of scale (i.e. bringing down cost of production by producing in volume)
    Have limited liability, meaning shareholder risk is limited to their share of ownership in the corporation
    The corporation transcends the lives of those persons who created it.
    Costs
    Corporations face tax implications (e.g. double taxation – profits are taxes at the corporate level and again when distributed to shareholders as dividends)
    Corporations are more expensive to establish
    Corporations are governed by more regulations.
    7
  • 8. COOPERATIVE
    Benefits
    Are members owned and operate for members benefit (e.g. credit unions)
    Members enjoy discounted services and may receive refunds at the end of the year
    Face no personal liability
    Have a vote in how the business is run
    Have interests similar to other members
    Costs
    Decisions made by the group may not suit all members
    The decision make process may be more complex and slower than other organizations
    8
  • 9. FRANCHISE
    Benefits
    Training and marketing is provided by the franchisor
    The franchisee gains exclusive rights to sell in an area
    Franchisee benefits from product development
    Costs
    The franchisee pays high franchise fees
    There is a limited product line
    Operates under strict guidelines and standards
    9