Post on 25-Feb-2016
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Different Types of Businesses
Ch. 8
• Entrepreneurs• Profit seeker, risk
taker who develops a new product or process
• Assumes risk of loss or profit
• They create something of value.
Creative Changes in market economy
• 1. Introduce new products
• 2. Improve quality of Existing Products
• 3. Introduce new production methods
• 4. Introduce new ways of doing business
• Financing the Business• “You need money to
make money”• Financial capital—the
money needed to start or expand the business
Chapter 8 Sole Proprietorship and Partnerships
• Sole Proprietorship- a firms is owned and managed by a single individual.
• Earns all the firms’ profits & responsible for losses.
• Some have many employees, but many do not.
• A self-employed person is not considered to be a paid employee.
Who is Sole Proprietor?• Most community business
are owned by sole proprietors.
• Ex. Hair stylist, truckers, lawyers, doctors, & dentist.
• Consist of just one self-employed person
• Work at the business all the time through out the year, only part time, part of the year.
• 5% are US business sales
Advantages of Sole Proprietorships• Most common type of business• 1. Easy to Start-minimum red
tape & legal expense. Need a business license & permit to collect state & local sales taxes.
• 2. Few Government Regulations- maintaining accurate tax records and complying w/ employment laws. No employees.
• 3. Complete Control- boss, w/ complete authority over all business decisions, such as what to produce, what resources to hire, & how to combine these resource.
continued• 4. Owner Keeps All Profit-
does not have to share profits.
• 5. Lower taxes- Income is taxed only once as the owner’s personal income. (corporate income is taxed twice.)
• 6. Pride of Ownership-Creating a successful business & watching it grow can provide a sole proprietor tremendous satisfaction.
Disadvantages of Sole Proprietorship
• 1. Unlimited Personal Liability- a sole proprietor faces unlimited personal liability for any loss.
• Liability-is the legal obligation to pay any debts of the business.
• Owner is responsible to pay. (personal savings or sell personal assets, such as a home or automobile.
continued• 2. Difficulty Raising
Financial Capital-has no partners or other financial backers, raising enough money to get the business going.
• 3. Limited Life- business ends when the owner dies or leaves the business. Sold & becomes new ownership.
continued
• 4. Difficulty Finding and Keeping Good Workers- lack of permanence and difficulty raising financial capital, trouble offering workers job security.
• 5. Unlimited Responsibility- great deal responsibility.
Partnership
• Partnership-which involves two or more individuals who agree to contribute resources to the business in return for a share of the profit.
• One is talented and the other supplies the money.
Homework
• Read Chapter 8, sections 8.1—8.3, write down all of the key terms and define them as well as the key concepts at the end of each section (p.233—247.
• Do 1-5 don’t do the graphing.