Title: Compare major types of business ownership.
Course: Make It Your Business (12151-18) > Section: Exploring Entrepreneurship

Comparison should include the definition, examples, and legal ramifications for the major types of business ownership:

- Sole proprietorship—owned by one person
- Partnership (general and limited)—owned by a small group of people, usually two or three
- Corporation—owned by a number of people, operated under written permission from the state, with a separate legal personality from its owners
  - Limited liability company (LLC)—a hybrid form of business that has characteristics of both a corporation and a partnership
  - Limited liability partnership (LLP)—allows partners to enjoy limited personal liability, while general partners have unlimited liability
  - S-corporation—meets specific Internal Revenue Code requirements that give a corporation with 100 or fewer employees the benefit of incorporation while being taxed as a partnership
- Franchise—business opportunity that allows the franchisee to start a business by legally using someone else’s (i.e., the franchisor’s) expertise, ideas, and processes
- Nonprofit corporation—formed to carry out a charitable, educational, religious, literary, or scientific purpose; does not pay federal or state income taxes from activities in which it engages to carry out its objectives
- Cooperative—an association of persons united voluntarily to meet common economic, social, and cultural needs and aspirations through a jointly owned and democratically controlled enterprise

Comparison should also include the definition of the four kinds of businesses:

- Service—provides intangible products with no physical form (e.g., repair shops, banks, accounting and law firms)
- Merchandising—buys products at wholesale price and sells the same at retail price; sells a product without changing its form (e.g., grocery stores, convenience stores, distributors, and other retailers)
- Manufacturing—buys products with the intention of using them as materials in making a new product; combines raw materials, labor, and factory overhead in its production process; sells manufactured goods to customers
- Hybrid—classified in more than one type of business; may be classified according to their major business interest. For example, a restaurant combines ingredients in making a fine meal (manufacturing), sells a cold bottle of refreshment (merchandising), and fills customer orders (service).

Process/Skill Questions

- What are the advantages and disadvantages of a sole proprietorship? Of a partnership? Of a corporation?
- Which of these business types presents the most risk? Why?
- Why should a partnership agreement be drawn up as a legal document?
- How does one become part owner of a corporation?
- What are the major benefits of a franchise?