Types of Business Organization

Transcription

1 Types of Business Organization

2 Forms of business ownership and types of businesses help describe how businesses are organized and ran. Why may a person choose to establish one type of business rather than another?

3 Four main forms of business ownership Sole proprietorships Partnerships Corporations Co-operatives You could argue that franchises are also a form of business ownership Maybe better described as a hybrid, combining several characteristics of the other forms of business ownership.

4 A business owned by one person (a proprietor). Money to run the business usually comes from the owner s savings, friends, family, or a loan. If business goes well, the owner enjoys all the profits. If business does poorly, owner is responsible for the losses.

5 Sole proprietorship is easy and inexpensive to create. The owner has complete authority over all business activities. It is the least regulated form of business ownership. The business pays no taxes; income is taxed at personal rate of owner. Starting the business is easier and less expensive than other forms of business. 5

6 The owner has unlimited liability. Raising capital is more difficult. The business is totally reliant on skills and abilities of owner. unlimited liability full responsibility for all debts and actions of a business 6

7 A business that s usually operated by two or more individuals who want to share the costs and responsibilities of running a business. They record the terms of their partnership in a partnership agreement. snzw&list=uuhhnqv51slsd0er179_73zq

8 A general partnership is when all partners have unlimited liability for the firm s debts. Unlimited liability each partner could be held liable (or responsible) for the other partner s businessrelated debts. A limited partnership is when partners have limited liability. Even if the business fails, their personal savings and other assets cannot be used to pay the partnership s debts. Limited liability each partner is only responsible for paying back the amount that they invested in the partnership.

9 Partnerships are inexpensive to create. General partners have complete control. Partners can share ideas. Partners can share ideas and secure investment capital more easily and in greater amounts. 9

10 It is difficult to dissolve one partner s interest without dissolving the partnership. There may be personality conflicts. Partners can be held liable for each others actions. 10

11 A business that has been granted legal status with rights, privileges, and liabilities that are distinct from those people who work for the business. Can be a small one-person business, or a large multinational business, and any size in between. Large corporations are often owned through shareholders (who own shares or stocks), and the business is ran by a board of directors that is put in place. Share/Stock a unit of ownership in a corporation. Shared on a stock exchange. Board of Directors A group of individuals who run a corporation or co-operative and make decisions on behalf of the shareholders.

12 Shareholders have limited liability Great advantage because it encourages the purchasing of shares. If the business fails, you only loose the money you invested in the shares. If the business profits, you may get a dividend. Dividend The part of the corporation s profit after taxes that each shareholder receives. 1SLSD0Er179_73ZQ

13 Types of Corporations Private Corporation Only a few people control all the shares, and shares are not listed publically. Ex: McCain Foods, Home Hardware, etc. Public Corporation Shares are sold on the stock exchange, and major shareholders have considerable impact because it gives them a vote on the board of directors. Ex: Tim Horton s, Canadian tire, Scotiabank, Bell etc. Crown Corporation A business operated by the provincial or federal government. Ex: Nalcor Energy, NL Liquor Corporation, CBC etc. Towns and cities can be considered Crown Corporations by incorporating themselves to provide services to their citizens.

14 Co-ops are Different From Private Enterprise. Liability is limited to the amount of cash injection you put into it. Owners benefit from use of the co-op s services., Not seeking a financial return on their investment Decision making is democratic one member/vote Not based on number of shares held Profits are allocated based use of the co-op s services Not based on number of shares held A co-ops business assets are owned collectively by local members Cannot be used for private gain Co-ops have stated social as well as economic goals Profit is not the only concern 3ZQ

15 Types of co-operatives in NL: Financial - providing banking, investment services Nfld. & Labrador Credit Union Retail groceries, hardware, building supplies Carol Lake Co-op Service health care, housing, childcare North Shore Central Ambulance Co-op Advocate Youth Services Co-op Producer fishery, farming, filmmaking, crafts Northeast Coast Sealer s Co-op Nfld Independent Filmmakers co-op

16 In a franchise operation, the franchiser (the business), licenses the right to its name, operating procedure, designs, and business expertise to another business, the Franchisee. It s a ready made business you, as the franchisee, would pay a certain amount up front, and royalties to the mother company throughout the period of your licensing agreement. Very popular because they offer brand recognition that consumers find appealing.

17 At first, there is a payment of the franchise payment to the franchiser. Rule of thumb: the most successful a franchise is, the more expensive the fee! The franchisee pays a monthly fee for being part of the franchise often a percentage of their monthly sales. Also have to pay for national and local advertising Supplies for the franchise has to be purchased through the franchisers Should reduce cost of supplies and provide uniform quality. UhHnqv51SLSD0Er179_73ZQ