1. I. Main Types of Business Ownership Table
Type Sole Proprietorship Partnership Corporation
Owner(s) One person Two or more people One or more
shareholders, who has
one vote per share
Manager(s) May be owner Determined by Managers, board of
partnership directors, and
agreement shareholders
Formation Begin buying and Vary by states Filing of an article of
selling goods or incorporation with
services, plus may state government
vary by states
Advantages 1. Easy to form 1. More capital and 1. Capital easy to
2. Complete control of credit available obtain
business than a sole 2. Limited liability for
3. Recipient of 100% proprietorship shareholders
of the profit 2. Work load shared 3. Possibility unlimited
4. One time taxation 3. Losses shared lifetime
Disadvantages 1. Limited capital 1. Profits shared 1. Double taxation:
2. Unlimited liability 2. Decisions made profits and
3. Limited lifetime of jointly earnings
owner 3. Unlimited liability 2. Government
depending on regulations
partnership type 3. Operations
controlled by
shareholders and
board of directors
instead of original
owner(s)
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2. Type Sole Proprietorship Partnership Corporation
Liabilities 1. Employment 1. Employment 1. Employment
2. Accidents and 2. Accidents and 2. Accidents and
injuries on injuries on injuries on
premises premises premises
3. Company vehicle- 3. Company vehicle- 3. Company vehicle-
related related related
4. Product-related 4. Product-related 4. Product-related
5. Errors and 5. Errors and 5. Errors and
omissions omissions omissions
6. Directors and
officers
Examples of 1. Employment: Manager fires an employee that missed significant
liabilities days from work.
2. Accidents and injuries on premises: Customer breaks a leg while
on business property.
3. Accidents and injuries on premises: Driver runs into a building
while driving company’s car.
4. Product-related: Toddlers are easily injured by a sharp edge of a
toy.
5. Errors and omissions: Employee accidentally damages a
customer’s property.
6. Directors and officers: One food ingredient that may cause cancer
is intentionally omitted from package.
Termination Decision or life of Actions of the Determined by charter
owner partners, or unlimited lifetime
bankruptcy, death,
and/or court order
Source(s) of Personal, gifts, Personals of Purchase of stocks
investment borrowed, and others partner(s), gifts,
may vary borrowed, and others
may vary
Examples of Answers will vary. • South Railroad • Bank of America
business Limited Partnership Corporation
ownership • Eden Limited • Lowe’s Home
Partnership Improvement Store
II. Other types of business ownership
A. Specialized partnership
Limited liability partnership
B. Types of partnerships
1. Dormant partner
2. General partner
3. Secret partner
4. Silent partner
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3. C. Specialized corporations
1. Subchapter/S-corporation
2. Limited liability company
3. Nonprofit corporation
D. Types of corporations
1. Domestic
Example: SAS Institute, Inc.
2. Foreign
Example: 1-800-flowers.com
3. Alien
Example: Toshiba
4. Public
5. Private
E. Cooperatives
F. Franchise formats
1. Business-format franchise
2. Product trade-name franchise
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4. 2.1 Types of Business Ownership Key Terms Crossword Puzzle
Directions: Fill in the crossword puzzle using the provided definitions.
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5. Types of Business Ownership Key Terms Crossword Puzzle Continued
Across
5. Two or more persons to carry on as co-owners of a business for a profit.
9. Each stock equals one _______ at the shareholder meeting.
10. Type of liability in which you can lose all your assets.
16. Formed by the way two or more people conduct their business (4 words).
17. Entity with the legal authority to act as a single person.
18. Partner has an active role, but unknown existence.
19. Grants permission to sells its products and services as a business.
Down
1. Business owned by one person (two words).
2. Partnership formed after they agree to conditions in a contract (two words).
3. Type of corporation that benefits the public and receives a tax break.
4. Abbreviation for a partnership with limited liability.
6. Partner has no role, but is known to public.
7. Type of taxation on a corporation.
8. Type of liability in which you only lose your initial investment in the company.
11. Partner plays no role and is not known to public.
12. __________ of incorporation.
13. Partner has an active role, unlimited liability.
14. Formed by a group to gain bargaining power.
15. __________venture is a special project for a limited time.
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6. Best Form of Business Activity
Directions: Read the scenarios and provide responses in your own words to the
questions in the spaces provided.
Scenario 1
Mary makes jewelry for her own business named The Design For You. She needs help
in completing orders to make necklace and earring sets in a timely manner. Mary
prefers working alone at her own pace. Mary’s cousin named Greg has expressed
interest in starting a business too. He likes using his hands, designing things, and has
access to jewelry making tools too.
1. Should Mary hire Greg to help her make the orders for jewelry or form a partnership
with him? __________________________________________________________
2. Compare the advantages and disadvantages of hiring Greg and remaining as a sole
proprietorship.
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
3. Compare the advantages and disadvantage of forming a partnership with Greg
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
Scenario 2
Teri enjoys assisting other students with their homework. Her neighbor named Francis
volunteers in assisting younger students with their homework in an after school
program. Teri and Francis talked about forming a partnership and expanding their
services.
1. Should Teri and Francis form a partnership? _______________________________
2. Compare the advantages and disadvantages of them forming a partnership
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
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7. Best Form of Business Activity Continued
Jade and John own and operate several ice cream stores. Jade is interested in
expanding the business by offering additional services and opening more locations.
John reminded Jade that they will need more resources in order to expand. Jade
suggested that they offer shares to relatives to finance the expansion.
1. Should Jade and John form a corporation? ________________________________
2. Compare the advantages and disadvantages of them forming a corporation.
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
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8. Name_________________________ Class _________________ Date _________
Sole-Partners-Corporate Activity
Directions: Work as a sole proprietor, partnership, or corporation to provide responses
to the scenarios in the space provided. Be prepared to present your findings.
Sole Proprietorship Scenario
Mary Jones operates her own staffing agency. Mary has about 30 steady employers
that request her services to send temporary workers for various jobs. She handles all
the financial, advertising, operations, and management issues for the agency. Mary
used a gift of $10,000 from her grandmother to start the agency. She would like to
expand the agency. She uses all her profit to sustain her personal living arrangements.
After seven days of constant rain, Mary realized soon after the rainy days that water is
leaking from several places of the roof. She is planning to borrow money to have the
roof repaired.
Complete the table using information from the scenario
Type Sole Proprietorship
Owner(s)
Manager(s)
Advantage(s)
Disadvantage(s)
Source(s) of investment
Other information
Consider the responses to the
above items, what should the
business owner do with the
business? Why?
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9. Name_________________________ Class _________________ Date _________
Sole-Partners-Corporate Activity
Directions: Work as a sole proprietor, partners, or corporation to provide responses to
the scenarios in the space provided. Be prepared to present your findings.
Partnership Scenario
Max and Tim enjoy skiing so much that they are thinking about opening a ski resort.
Max recently inherited about 100 acres of land in the mountains. This amount of land
will easily accommodate a ski resort. Tim has about $30,000 in his saving account.
Tim’s neighbor operates a successful business. Both of them have limited knowledge
about operating a business. They talk about offering ski slopes, equipment, housing,
food, and entertainment at the resort. Max may have to continue working his full-time
job as a teacher even once they opened the resort. Tim is ready to quit his job as an
attorney right away and start the business.
Complete the table using information from the scenario
Type Partnership
Owner(s)
Manager(s)
Type of partners should be
considered
Advantage(s)
Disadvantage(s)
Source(s) of investment
Other information
Consider the responses to the
above items, what should they with
their resources and desire to open
the ski resort? Why?
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10. Name_________________________ Class _________________ Date _________
Sole-Partners-Corporate Activity
Directions: Work as a sole proprietor, partners, or corporation to provide responses to
the scenarios in the space provided. Be prepared to present your findings.
Corporation Scenario
A company wants to expand to several other cities. The board of directors proposed the
option of selling 300 more shares to obtain the funds. The company stock value has
decreased about 1% over the past year. The corporation has earned an average profit
of over $40,000 for the past three years.
Complete the table using information from the scenario
Type Corporation
Owner(s)
Manager(s)
Advantage(s)
Disadvantage(s)
Source(s) of investment
Other information
Consider the responses to the
above items, should the company
pursue its expansion plans? Why?
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11. Note: These assessment prototypes are examples of the types of items included in the
item bank. All items are comparable to the cognitive process of the understand verb.
Questions require students to demonstrate that they understand the content.
Assessment prototypes will not be used on the secured test, but questions in similar
formats will be used.
A company sold 500 shares of stock and still relies on a central body of people for
financial directions. This is an example of what type of business?
A. Cooperative
B. Corporation
C. Partnership
D. Sole Proprietorship
ANSWER:
Joe invested $500,000 into his sole proprietorship. He lost a $1 million lawsuit and does
not have any liability insurance. As a result of the lawsuit, how much will he have to
pay?
A. $0
B. $500,000
C. $750,000
D. $1,000,000
ANSWER:
Wendy is free of obligation of a role in her business and is an unknown partner, but she
collects some of the profits each month. This is an example of what type of partner?
A. Dormant
B. Limited
C. Silent
D. Secret
ANSWER:
Mary works alone in her catering business and enjoys scheduling her daily routine. She
is experiencing which advantage of a sole proprietorship over a corporation?
A. Owner control of decisions
B. Owner limited life
C. Owner recipient of 100% of the profit
D. Owner unlimited liability
ANSWER:
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12. Liability is for which anything a company owes.
Specialized Partners
1. Dormant partner plays no role and is not known to the public.
2. General partner plays an active role and has unlimited liability (every partnership
must have at least one general partner).
3. Limited participate as investors and have limited liability.
4. Secret partner plays an active role but is secret from society.
5. Silent partner does not have an active role but is known to the public.
Franchise Formats
1. Business-format franchise requires franchisee to sell products or service in a specific
format.
Examples
Jackson-Hewitt Tax Services
Burger King
Firestone Tires
2. Product-trade franchise allows franchisee to sell specific products. This format is
usually formed by automobile, appliance, and petroleum product.
Examples
Marc Jacobson Toyota
Bobby’s Appliance store
Local stores selling Shell brand of gasoline
Types Corporations
1. Domestic corporations are chartered in a specific state.
2. Foreign corporations are chartered in one state but doing business in another state.
3. Alien corporations are chartered in another nation but doing business in a state.
4. Public corporations are established for governmental purposes.
5. Private corporations are established by individuals for business or charitable
purposes.
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