Chapter 6

Business
Ownership and
Operations
Read to Learn
Section 6.1
Describe the advantages and disadvantages of
Types of Business the three major forms of business organizations.
Ownership
Describe how cooperatives and nonprofits are
like and unlike corporations and franchises.

The Main Idea Key Concepts

Sole proprietorships, partnerships, and Organizing a Business
corporations are the most common forms of
business organization. Cooperatives, nonprofits, Other Ways to Organize a Business
and franchises are other forms.

Key Term Key Term

a business owned by two or more
sole a business owned by one
partnership people who share its risks and
proprietorship person
rewards

a company that is registered by a

unlimited when the owner is responsible
corporation state and operates apart from its
liability for the company’s debts
owners

1
 Key Term Key Term
holding a firm’s owners responsible a type of business that focuses on
limited nonprofit
for no more than the capital that providing service, not on making a
liability organization
they have invested in it profit

a contractual agreement to use the

an organization that is owned and
cooperative
operated by its members
name and sell the products or
franchise
services of a company in a
designated geographic area

Organizing a Business Figure 6.1

U.S. Sole
The three main types of business Proprietorships,
Partnerships, and
organizations are: Corporations

Sole
Partnerships Corporations
Proprietorships

Sole Proprietorships Graphic Organizer

About three-quarters Advantages of Sole Proprietorships

sole proprietorship
of all businesses in a business owned by one
the United States are Proprietors are
person Easy to start
in charge
sole proprietorships.

Proprietors keep Taxes are lower

all the profits than a corporation’s

2
Sole Proprietorships Graphic Organizer

A major disadvantage Disadvantages of Sole Proprietorships

unlimited liability
of owning a sole when the owner is
proprietorship is that Limited access Many run out
responsible for the
to credit of money
the owner has company’s debts

unlimited liability.
The owner may not have The business ends
the necessary skills when the owner dies

Partnerships Graphic Organizer

To start a Advantages of Partnerships

partnership
partnership, you a business owned by two
Easy to Easier to Easier to
need a partnership or more people who share start obtain capital obtain credit
agreement. its risks and rewards

Not dependent
Only taxed Diversity in
on a sole
once skills
person

Graphic Organizer Corporations

Disadvantages of Partnerships To form a
corporation
corporation, the a company that is
If one partner owners must get a registered by a state and
Unlimited legal operates apart from its
Business risk is
and financial
makes a mistake, corporate charter from
shared
liability is shared
all partners are owners
responsible the state where their
main office will be
located.

3
Corporations Graphic Organizer

Limited liability is a Advantages of Corporation

limited liability
major advantage of a holds a firm’s owners
corporation. responsible for no more
than the capital that they Ability to raise Business does
Limited liability money by not end when an
have invested in it selling stock owner dies

Graphic Organizer Other Ways to Organize a Business

Disadvantages of Corporation Other ways to organize a business include:

More government Difficult and

Double taxation
regulation costly to start
Nonprofit
Cooperative Franchise
Organization
1. Income is taxed.
2. Stockholders pay taxes
on profits issued to them

Other Ways to Organize a Business Other Ways to Organize a Business

The purpose of a A nonprofit

cooperative is to
save money on the
purchase of certain
goods and services.
cooperative nonprofit organization
an organization that is
organization does a type of business that
owned and operated by its not pay taxes because focuses on providing a
members it does not make a service, not making a
profit
profit.

4
Other Ways to Organize a Business
To run a franchise,
you have to invest
money and pay
franchise fees or a
share of the profits.
Car Sharing
franchise
a contractual agreement to Car sharing is a popular European process in
use the name and sell the which many households share vehicles.
products or services of a
company in a designated Mobility CarSharing cooperative in Switzerland
geographic area
has over 50,000 clients.

1. What is the difference between a sole 2. If a partner makes a bad decision, what
proprietorship and a partnership? responsibility do the other partners have?
A sole proprietorship is owned by one person. All partners share responsibility for a
A partnership is owned by two or more people. bad decision.

End of
Chapter 6
Business
Ownership and
Operations
3. Why are cooperatives formed? Section 6.1
so that the members have advantages Types of Business
in buying and selling products and Ownership
services