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Lesson 7.2
Objective:
Students will be able to:
Discuss advantages and disadvantages of a sole proprietorship, partnership, and corporation.
Chapter 7 Slide 2
Terms
sole proprietorship partnership corporation share of stock board of directors dividends
Chapter 7 Slide 3
Sole Proprietorship
sole proprietorship
a business that is owned exclusively by one person
Chapter 7 Slide 4
Chapter 7 Slide 5
Partnership
partnership
a business owned by two or more people
Chapter 7 Slide 7
Chapter 7 Slide 8
Chapter 7 Slide 9
Corporation
corporation
a business that has the legal rights of a person but is independent of its owners
Chapter 7 Slide 10
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
Corporation
Must create corporate bylaws that are the operating procedures for the corporation.
It must name a board of directors
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
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
Advantages of Incorporation
Personal liability is limited to the amount of money each shareholder invested in the company.
Personal assets of shareholders are protected.
Disadvantages of a Corporation
The disadvantages of a corporation include:
A lawyer is required to establish a corporation because a corporation is complex.
costly
Chapter 7 Slide 16
Disadvantages of a Corporation
Corporations are subject to more government regulation that other types of businesses.
Income is taxed twice.
corporate income individual income
Chapter 7 Slide 17