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02_Bus_Ownership.pptx
- 1. Forms of Business Ownership Copyright © Texas Education Agency, 2012. All rights reserved.
- 2. Four elements: 1) Private property rights 2) Freedom of choice 3) Profits 4) Competition Copyright © Texas Education Agency, 2012 All rights reserved. 2
- 3. •Sole Proprietorship •Corporation •Partnership Copyright © Texas Education Agency, 2012. All rights reserved. 3
- 4. …a business that is owned and managed by one individual who receives all the profits and bears all losses. This business is unincorporated. In the U.S. Sole Proprietorships make up 70% of all businesses. Copyright © Texas Education Agency, 2012. All rights reserved. 4
- 5. Pros & Cons of Sole Proprietorship Participate in the class discussion and add to your notes 5
- 6. …a business that is owned and managed by two or more individuals who receive all profits and bear all losses. An unincorporated business. Partnerships make up 10% of all U.S. businesses. Copyright © Texas Education Agency, 2012. All rights reserved. 6
- 7. Pros & Cons of Partnership Participate in the class discussion and add to your notes 7
- 8. …a business that is owned by stockholders and that has legal rights and responsibilities as if it were a person. Corporations make up 20% of all U. S. Businesses. Copyright © Texas Education Agency, 2012. All rights reserved. 8
- 9. Pros & Cons of forming a Corporation Participate in the class discussion and add to your notes 9
- 10. Other Forms of Businesses S Corporation Like a regular company except does not pay taxes LLC Hybrid form of ownership used to avoid some of the disadvantages of sole proprietor LLP Hybrid form of ownership used to avoid some of the disadvantages of partnerships 10
- 11. Pros & Cons of Other Forms of Businesses Review the class discussions of the pros & cons of the three major forms of ownership and the reasons given for creating the other forms of ownership. Do a Pro/Con list for S Corp LLC or LLP 11
- 12. Copyright © Texas Education Agency, 2012 All rights reserved. 12 “Copyright and Terms of Service Copyright © Texas Education Agency. The materials found on this website are copyrighted © and trademarked ™ as the property of the Texas Education Agency and may not be reproduced without the express written permission of the Texas Education Agency, except under the following conditions: 1) Texas public school districts, charter schools, and Education Service Centers may reproduce and use copies of the Materials and Related Materials for the districts’ and schools’ educational use without obtaining permission from the Texas Education Agency; 2) Residents of the state of Texas may reproduce and use copies of the Materials and Related Materials for individual personal use only without obtaining written permission of the Texas Education Agency; 3) Any portion reproduced must be reproduced in its entirety and remain unedited, unaltered and unchanged in any way; 4) No monetary charge can be made for the reproduced materials or any document containing them; however, a reasonable charge to cover only the cost of reproduction and distribution may be charged. Private entities or persons located in Texas that are not Texas public school districts or Texas charter schools or any entity, whether public or private, educational or non-educational, located outside the state of Texas MUST obtain written approval from the Texas Education Agency and will be required to enter into a license agreement that may involve the payment of a licensing fee or a royalty fee. Call TEA Copyrights with any questions you have.
Editor's Notes
- The power to govern in our free enterprise system emerges from the people. Article I, Section 8 of the Constitution of the United States gives Congress the power to make all laws which are "necessary and proper" to carry out its duties. The government acts to encourage the production of goods and services and to regulate these firms against unfair practices among business and labor. Its role in regard to labor is to ensure that labor can negotiate with employers for fair wages, salaries, benefits, and general working conditions. This unit is designed to expose students to interrelated functions of control by government in regard to business and labor.
- Market economies rely on a private enterprise system. In turn, private enterprise requires the presence of four elements:
- After a classroom discussion on the different forms of business ownership (sole proprietorship, corporation, and partnership), students, either individually as a group, identify and classify at least two businesses (either local, national or international) involved in the blue jeans industry for each form of business ownership.
- Have students suggest which businesses, or types of businesses, are likely to be Sole Proprietorships. Examples, small shops, butchers, home businesses, independent outlets…. The sole proprietorship is the simplest form of operating a business. Only one owner is responsible for making all of the business decisions and, therefore, earns all the profits, but also assumes all of the risks and obligations. Most sole proprietorships tend to be small and localized. The advantages commonly associated with carrying on a sole proprietorship are the following: ease in which to commence and dissolve the business; and (2) modest start up expenses. There is, however, a significant disadvantage which may lead you to decide against choosing this business form, namely, unlimited liability. The owner is personally responsible for all of the debts and obligations incurred by the business. The owner is thus liable to the full extent of his/her personal assets for all of the liabilities and losses which are incurred by the business. Also, the owner is liable for the actions of employees in the course of their employment. Most jurisdictions require that sole proprietorships register with the relevant government department or authority under the trade name it is operating. • Decision making is entirely in hands of the owner. • Hard to raise funds. Sources of funds limited to the owner’s personal funds and the funds that outsiders are willing to provide. • Unlimited personal liability if something bad would happen. You could lose your car, home, etc., if someone sued your business. Creditors can take personal and business assets. • You have no job security and are completely responsible for the success for your business. You don’t have worker’s compensation or unemployment insurance. • The business terminates with the death, disability, or retirement of the owner.
- Talk about the fact that partnerships are common in professions - lawyers, accountants, architects, surveyors, estate agents, vets, etc. A partnership is a relationship between two or more persons carrying on a business with a view to making a profit. The organization is usually more complex than that of a sole proprietorship and there is more than one owner to share in the profit and/or losses. Some groups of individuals choose a partnership as the manner in which to carry on a business because of its ease of formation and dissolution, as well as its overall lack of formalities. However, like a sole proprietorship, one of the primary disadvantages to choosing a partnership as your business form includes the unlimited personal liability of each partner for all of the debts and obligations of the partnership. In other words, every partner is liable for all the debts incurred by the other partners while acting in the course of business, regardless of the capital contribution of individual partners.
- A corporation (also called "company") is a legal entity that has its own legal personality which is distinct from its owners (called shareholders) and the individuals who manage and run its affairs and business (called directors and officers). Emphasize the concept that a corporation is a separate entity. The creation of a corporation occurs following the proper filing of Articles of Incorporation (also called a Charter or Certificate of Incorporation) with the relevant government department or authority. Every corporation is comprised of shareholders, directors and officers. Shareholders, as the name implies, are the ones who hold (i.e., own) the shares in the corporation. By reason of the votes that are usually attached to the shares, the shareholders control the corporation. If there is only one shareholder, that person has absolute control of the corporation. If the corporation has numerous shareholders, control of the corporation depends on who has a majority of the voting shares. However, the shareholders do not directly manage the corporation. They exercise their influence by electing and removing directors and approving or disapproving major corporate decisions. One of the responsibilities of the shareholders is to elect the directors of the corporation, usually on an annual basis. Directors need not be shareholders of the corporation. The Directors are responsible for supervising and administering the corporation's affairs, and appointing the officers, who are in turn responsible for the day to day running of the corporation.
- Market economies rely on a private enterprise system. In turn, private enterprise requires the presence of four elements: