NAME: MOD. GRADE: / DATE GIVEN: DATE DUE: UNIT 2 FORMS OF BUSINESS OWNERSHIP PROPRIETORSHIPS - PARTNERSHIPS - CORPORATIONS

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1 NAME: MOD. GRADE: / DATE GIVEN: DATE DUE: UNIT 2 FORMS OF BUSINESS OWNERSHIP PROPRIETORSHIPS - PARTNERSHIPS - CORPORATIONS OBJECTIVES: Create understanding of proprietorships, partnerships, and corporations List advantages of proprietorships, partnerships, and corporations. NBEA STANDARDS: III Business Organization IIIA - Forms of business Ownership IIIC- Organizational Structure Half of all new business fail within the first years. Most new business fail because of. If you want to compete in the marketplace, you must go.. WHO IS THE FAMOUS ENTREPRENEUR? He started what?. First success? ENTREPRENEUR Someone who undertakes the risk of,, a small business for the purpose of. SOLE PROPRIETORSHIP (aka ) Business owned and managed by. PROPRIETORSHIP PROPRIETOR SELF EMPLOYMENT ENTREPRENEUR CHARACTERISTICS BUSINESS PLAN aspect of the business. / Why seek self employment: upside: 1. Be your 2. Make your 3. from your hard work. ***There is good and bad about being self-employed. After reading the list of good and bad in the power point, what would motivate you to start a new business? Give one reason why YOU would want to be self employed.. Name one thing you would be willing to sacrifice for the good of YOUR business. /calculated risks /where I am/where I want to be/how can I get there /initiative to make decision a reality /ability to see need and fulfill demand document that describes the nature of business, company and, and how it will be AND THESE FOUR THINGS,,. 1

2 Look up information about Balance Sheets and fill in blanks UP TO SOLE PROP. might want to use pencil. Do math for totals in red and fill in balance sheet. BALANCE SHEET A financial statement that summarizes assets, liabilities, capital of a business on specific day in time. FORMULA FOR BALANCE SHEET ASSETS Things by the business (ex: CREDITORS A person to whom money is. ex: LIABILITIES of the business ex: CAPITAL (aka Stockholder s Equity, Net Worth) shows Stockholder s worth in business. FORMULA LOOKING AT Is this a balance sheet or income statement? BALANCE SHEET Is this a sole proprietorship or a partnership? Explain your answer. ABOVE (Betty Caskey) How was her capital determined? Explain. How is Ms. Caskey doing financially? Explain your answer. SOLE PROPRIETORSHIP ***List the three advantages from the list YOU would consider most ADVANTAGES important in making a decision to become a sole proprietor of a business. 1. ; 2. ; 3. WHAT COMPANY ARE WE TALKING ABOUT? ; WHO IS THE FOUNDER OF THIS COMPANY?. (How many years did it take him to make $6.7B? ) SOLE PROPRIETORSHIP Owner may lack special skills and abilities, lack funds, bears ALL losses. DISADVANTAGES Illness/death may close business. 2

3 ***As a business owner, what decision could YOU make to avoid some of the disadvantages listed?. WHO IS OUR ENTREPRENEUR? What company does he own? BUSINESS SUITED TO PROPRIETORSHIP SMALL BUSINESSES FAIL BECAUSE PARTNERSHIP PARTNERSHIP AGREEMENT PARTNERSHIP ADVANTAGES 1) Can be managed by 2) Do not require a great amount of. List two types of business you think are suited to being a Proprietorship: 1., 2. 1) lack of 2) Unincorporated business organization owned by persons called and share in the of the business. Clearly agreed upon terms and all conditions of contract. List four of the partnership advantages given that YOU would give cite as the main reasons for creating a Partnership rather than a Sole Proprietorship? ; 4. BALANCE SHEET (Answer questions to best of your ability & fill in blanks on balance sheet) Is this a Sole Proprietorship or a Partnership? Is this an Equal Partnership? Explain. How are they doing financially? WHO ARE OUR FAMOUS ENTREPRENEURS? What did they do before beginning their business? What did they do to connect with the public?. How long did it take to have sales of $32B? 3

4 PARTNERSHIP financial liability; Partnership DISADVANTAGES Partners bound by ; Uncertain sources of capital; Unsatisfactory Difficulty. WHAT DID THIS DUO CREATE? WHO ARE THEY? What were sales in 2010? ; How long did it take to create these earnings? years COMBINING ***Partner A invests $40,000 Partner B invests $30,000 BUSINESSES Total investment = $ Equal partnership? For equal partnership, how much would have to invest? $ What % of the partnership would each partner have if not an equal partnership? use this formula: (% of individual invest./total invest. (will do together) A B / = % / = % Assets= Bldg+ what each brings. Total worth=all assets combined What would be the major advantage of being a part of an equal partnership? UNLIMITED LIABILITY The business and partners are responsible for of the business. If the business declares bankruptcy, the courts can take to satisfy the debt. If debt still remains, they can go after, such as your house, car, personal savings, etc. in order to satisfy the debt. PERSONAL ASSETS What you of the business. RECOURSE What does this word mean? Look it up and write the definition: (will do together) ***What recourse do you think you would have if you have an equal partnership, unlimited liability all business assets have been seized, and they go after personal assets, courts take $70,000 from you in personal assets, yet your partner only has $20,000 to surrender in personal assets. Do you have any recourse to recover $50,000 from your partner? Explain why $50,000 and what would be the recourse?. ***Solve the following financial problems ON YOUR OWN! CARLTON and BAKER have an EQUAL PARTNERSHIP but also UNLIMITED LIABILITY. In this scenario, the business fails. Assets of business = $ Liabilities of business = $ Amount of debt of the business = $ Baker Personal Assets of $ Carlton Personal Assets of $ What is each partner s share of the debt? What will Carlton end up paying? $ What will Baker end up paying? $ Why will each end up paying the amount you indicated? 4

5 SOLVE ON YOUR OWN: *** ABC PARTNERSHIP DISSOLVING THREE PARTNERS EQUAL PARTNERSHIP UNLIMITED LIABILITY $100,000 owned to creditors after converting everything to cash. Partner A has only $ to give in personal assets. Partner B and Partner C will be liable for what amount? $ Why? 1) Who will creditors go after to collect the $100,000? 2) As long as unlimited liability, once all business assets surrendered, what else can creditors go after in collection of the debt? 3) Can partners sue another partners? 4) In this scenario, would Partner B and C sue Partner A? If no, why not? If yes, for how much? LIMITED PARTNERSHIP BUSINESS NAME Restricts of partner to the of of the partner s. THE TERMS OF LIMITED PARTNERSHIP 1. partner must have unlimited liability 2. Name of limited partner 3. of those with limited partnership 4. Advantageous for of money but lack of time or interest to manage. List four tips given in video: 1) 2) 3. 4) Proprietorship or partnerships can be conducted under. And Company or & Co.--if partners, not permissible to use name such as Jones, Smith & Co. because name indicates. Names included in Company must be identified by registration at. Artificial Name (Superior Shoe Store) is or name; must register as or. Proper registration required for creditors to know who is responsible for business. BASED ON BUSINESS NAME INFORMATION: ***Which of these businesses would most likely be a partnership? Which would be a sole proprietorship? Which would possibly be a corporation? Smith s Carpentry Shop? Y, B, & C Fine Foods? Fine Realty, Inc.? DO ON YOUR OWN: ***LIMITED PARTNERSHIP ABC CORPORATION A=UNLIMITED LIABILITY $ INVESTED B/C=LIMITED LIABILITY $ INVESTED ABC CORPORATION: Debt: $ 1)How much will B owe? 2)How much will C owe? Total of B/C toward debt= $ 3)How much will A owe? Why? 4)Why isn t B&C listed in the company name? 5

6 CORPORATIONS CORPORATE ADVANTAGE IN MARKETPLACE chartered by ; given legal rights as an separate from owners. Can goods and services to more people. Sales over times more than sales from proprietorships. Sales over times more than sales from U.S. partnerships. Can sell their products at prices. WHY? Higher, greater stability, Better & benefits. In the U.S., most large businesses organized as corporations. Successful, small businesses, often convert from sole proprietorships and partnerships to corporations as they grow. CORPORATIONS Business owned by a and authorized by in which located to act as though a in,,, WHAT DID THIS TRIO CREATE? Name of partners? How long did it take them to each make millions of dollars? years. CHARTER STOCKHOLDERS PROXY DIVIDENDS BOARD OF DIRECTORS OFFICERS Official document granted by giving power to run corp. aka. Article First contains: Article Second contains: Article Third contains: Article Fourth contains: of the corporation and have right to certificate. ballot for purposes. distributed to on per basis. body of corporation elected by. Responsibilities: Appoint of the company. Corporation must have officers: 1) 2) ; 3) Board of Directors the corporation by developing and to guide the corporation; Make business decisions; Oversee of the corporation. Run operations of the business. Report to. 6

7 CLOSE CORPORATION OPEN CORPORATION DOUBLE TAXATION JOINT VENTURE VIRTUAL CORPORATION BRICK & MORTAR S-CORPORATION C-CORPORATION LLC (aka Held Corporation). -run business. Financial activities remain. Does offer its shares of stock to the Examples of Close Corp. (aka ) offers of stock for public sale. Must file with the federal government.. Federal government and investors can examine. Example of Open Corp. Disadvantage of corporations. Taxed as a and taxed as stockholder on. parent companies agree to share,, resources,, to form new entity under shared control for time frame ( years) aka Virtual Enterprise employs means to transact business as opposed to traditional brick and mortar business. examples: LOOK UP AND DEFINE. Local examples of Brick and Mortar business: S stands for and type of federal tax laws that apply. 1) must have no more than stockholders 2) business can t own more than % of stock in corporation 3) no more than %of income of corporation can be from sources other than for the stated in charter 4) stockholders must be of U.S. 5) taxed as if partnership number of owners. Subject to C stands for LLC stands for Owners have personal liability for & of the LLC is not taxed. Tax paid at level. not personally liable for or of business like a corporation No number of members. Most states permit member LLCs, those having only owner. Banks and insurance companies be LLC s PARTNERSHIP vs CORPORATION vs S-CORPORATION 1) Major weakness of partnership is whereas strength of corporation is 7

8 2) Major strength of partnership is whereas weakness of corporation is than that paid by partnership. 3) Stockholders have to pay distributed by corporation. This is called. S-Corporation offers and, profits from the corporation go directly to the who include them in their thus avoiding. SOCIAL ENTREPRENEURSHIP The new. Their focus:. They do not pay and do not exist to make. Account for of GDP. Example: QUASI-PUBLIC CORPS. corporation supported by but whose stock is. Responsibilities spelled out in the corporations. Example: An example of a quasi-public company is Fannie Mae, Sallie Mae, Freddie Mac which was started by a congressional charter in order to encourage home ownership among low- to middle-income Americans. Sallie Mac was for student loans. FYI: FANNIE AND FREDDIE OWNED $5T IN U.S. MORTGAGES HALF THE NATION S TOTAL. BAILOUT: $600B in govt. buying of assets of F&F COOPERATIVES Businesses owned and operated by a group of. Purpose: provide members with and advantages when purchasing (i.e. ) that they wouldn t have % 47% 74.8% Did you know: The average and median age of company founders of entrepreneurs have a bachelor s degree of entrepreneurs have an advanced degree 69.9% are married 59.7% of entrepreneurs have at least one child when they launch their first business 43.5% of entrepreneurs have two or more children when they launch their first business Less than 1% came from extremely rich or extremely poor backgrounds indicated desire to build wealth as an important motivation in becoming an entrepreneur. 44 8