2. Chapter 7 Slide 2 Lesson 7.2Choose a Legal Form of Business Objective: Students will be able to: Discuss advantages and disadvantages of a sole proprietorship, partnership, and corporation.
3. Chapter 7 Slide 3 Terms sole proprietorship partnership corporation share of stock board of directors dividends
4. Chapter 7 Slide 4 Sole Proprietorship sole proprietorship a business that is owned exclusively by one person
5. Chapter 7 Slide 5 Advantages of a Sole Proprietorship Easy to get established Full control over all business decisions Owners keep all profit Flexibility Tax advantages
6. Chapter 7 Slide 6 Disadvantages of a Sole Proprietorship It can be difficult to raise money for the business. Responsible for every aspect of the business Unlimited liability Personally liable for business debts Limited skills and knowledge
7. Chapter 7 Slide 7 Partnership partnership a business owned by two or more people
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10. Chapter 7 Slide 10 Corporation corporation a business that has the legal rights of a person but is independent of its owners
11. Corporation You must file articles of incorporation with the appropriate state government office. Articles of incorporation is a written document that defines: Ownership Operating procedures Conditions for the business. Chapter 7 Slide 11
12. Corporation Must create corporate bylaws that are the operating procedures for the corporation. It must name a board of directors Issue share of stocks to investors Chapter 7 Slide 12
13. Corporation board of directors a group of people who meet several times a year to make important decisions affecting the company in addition to strategic decisions, they also determine dividend payments Chapter 7 Slide 13
14. Corporation share of stock a unit of ownership in a corporation The individual or group that owns most shares maintains control of the company. dividends distributions of corporate profits to shareholders Chapter 7 Slide 14
15. Chapter 7 Slide 15 Advantages of Incorporation Personal liability is limited to the amount of money each shareholder invested in the company. Personal assets of shareholders are protected. Corporations can raise money by selling stock.
16. Chapter 7 Slide 16 Disadvantages of a Corporation The disadvantages of a corporation include: A lawyer is required to establish a corporation because a corporation is complex. costly
17. Chapter 7 Slide 17 Corporations are subject to more government regulation that other types of businesses. Income is taxed twice. corporate income individual income Disadvantages of a Corporation
18. Choosing a Legal Form of Business Is it easy to establish? Start-up Cost Liability Taxation Distribution of profits Management Control Chapter 7 Slide 18
