3. What is a Sole Proprietorship?
•A business owned and operated by one
•The easiest and most popular type of
•Approximately 76 percent
of all businesses in the U.S.
are sole proprietorships.
4. Advantages of Sole Proprietorships
•Easy and inexpensive to create.
•Owner makes all business decisions and
•Owner receives all profits.
•Least regulated type of business
•Business itself pays no taxes.
5. Disadvantages of Sole Proprietorships
•Owner has unlimited liability for all debts and
actions of the business.
Unlimited liability means the
debts of the business may be paid from the
personal assets of the owner.
•Difficult to raise capital.
•Sole proprietorship is limited by his/her skills
6. What is a Partnership?
A type of business
ownership in which two
or more people share
the assets, liabilities,
7. Types of Partnerships
•General partnership: A partnership in which all
partners have unlimited personal liability and take full
responsibility for the management of the business.
•Limited partnership: A partnership in which the
partners’ liability is limited to their investment.
•Joint venture: A partnership in which two companies
join to complete a specific project. The partnership ends
after a specified period of time.
•Strategic alliance: A partnership in which two
businesses work together for mutual benefit. (Example: A
business types a partnership with a manufacturer that agrees to
produce the business’s products.)
8. Advantages of Partnerships
•Shared decision making and management
•Easier to raise capital than in a sole
•Few government regulations.
•Business losses are shared
by all partners.
10. What is a Corporation?
A business that is chartered by a
state and legally operates apart
from its owners.
11. Types of Corporations
• C-corporation: The most common type of
corporation. It protects the entrepreneur from being
personally sued for the actions and debts of the
• Subchapter S-corporation: A corporation that is
taxed like a sole proprietorship or partnership with
each shareholder paying tax on the
amount of their proportionate shares.
12. Clarification on S-Corporations
Types of S-Corps
Some professions that choose the S-corp tax include certified public accountants,
real estate agents, attorneys, construction contractors and financial advisers.
But it can be an advantage for almost any business to file its taxes as an S-corp,
especially if it has an owner-operator who makes significantly more than the average
salary in that field. For example, according to Gedeon Law & CPA, an accomplished
CPA who earns $246,000 from a self-employed S-corp could pay himself a salary of
$91,000, and save the employment taxes on more than $150,000 by taxing the rest
as a dividend payment.
With this information, you can "assume" that almost any CPA firm, Real Estate Firm,
Attorney Office (more than one lawyer) etc would be an S-Corp. The members of the
corporation would pay tax on the part that they earn. Look online or in your local
phonebook for a name of one of these types of corporations.
Another site: http://s-corp.org/about/
Under the ABOUT tab you will see their board of directors. Each has an S
corporation. Also, there is a list of ALLIES which are other S Corporations.
13. Types of Corporations
• Nonprofit corporation: Legal entities that make money for
reasons other than the owner’s profit.
o education foundations
o trade associations
• Limited Liability Company (LLC): A new type of business
ownership that provides limited liability and tax advantages.
o Law firms
o Medical firms
14. Advantages of Corporations
•Can raise money by issuing shares of stock.
•Offers owners limited liability.
(Limited liability: Owners are liable only up to the amount of
•People can easily enter or leave the business
by buying or selling
their shares of stock.
15. Disadvantages of Corporations
•Legal assistance is needed to start a
•Start-up is costly.
•Corporations are subject to more government
regulations than partnerships or sole
•A lot of paperwork is involved in running a
•Income is taxed twice.
16. Other Ways to Start a Business
•Buy an existing business.
•Enter a family business.
•Own a franchise business.
17. Buying an Existing Business
•Existing businesses already have
customers, suppliers, and
•Seller of the business may be willing to
train the new owner.
18. Buying an Existing Business
•Business may be for sale because it is not making a
•Problems may be inherited with the purchase of an
•Many entrepreneurs may not have the capital
needed to purchase an existing business.
19. Entering a Family Business
•There is a certain sense of pride and accomplishment
that comes from being part of a family endeavor.
•A business can remain in the family for generations.
•Some people enjoy working with relatives.
•The efforts of running a family business give one the
benefit of knowing that their efforts are helping those
whom they care about.
20. Entering a Family Business
•Senior management positions are often held by family
members who may not be the best qualified.
•It may be difficult to retain qualified employees who are not
members of the family.
•Family politics may affect decisions regarding the business.
•It is often difficult to separate business life and private life in
•It is often difficult to set policies and procedures and to make
21. Owning a Franchise Business
Terms You Should Know
Franchise: A legal agreement that gives an individual
the right to market a company’s products or services in
a particular area.
Franchisee: A person who purchases a franchise
Franchisor: The person or company who sells a
Initial franchise fee: The fee the franchise owner pays
in return for the right to run the
22. Purchasing a Franchise Business
An established product or service is being
Franchisors often offer management, technical,
and other assistance.
Equipment and supplies may be less expensive.
A guarantee of consistency attracts customers.
23. Purchasing a Franchise Business
The cost of franchises may be high, which can reduce
Franchise owners are limited in the decisions they can
make regarding the business.
The performance of other franchises impact on the
The franchise agreement may be terminated by the