1. B. OVERVIEW OF SMALL
BUSINESS
3.00 Explain the legal
environment of small business.
3.01 Compare forms of business
ownership.
(The logos used in this PowerPoint were copied directly from corporate websites. They
have not been altered in any way.)

2. Three basic forms of business
ownership
•Sole proprietorship
•Partnership
•Corporation

3. Sole proprietorship
•A business owned and
operated by one

4. Advantages of sole proprietorships
•Easy and inexpensive to create.
•Owner makes all business decisions.
•Owner receives all profits.
•Least regulated form of business
ownership.
•Business itself pays no taxes.

5. Disadvantages of sole proprietorships
•Owner has unlimited liability for all debts and
actions of the
business. Unlimited liability:
The debts of the business may be paid
from
the personal

6. Partnership
A form of business
ownership in which
two or more people
share the assets,
liabilities, and profits.

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

8. Advantages of partnerships
•Shared decision making and management
responsibilities.
•Easier to raise capital than in a sole
proprietorship.
•Few government regulations.

9. Disadvantages of partnerships
•Partnerships may lead to disagreements.
•Some entrepreneurs are not willing to share
responsibilities and
profits.
•Some entrepreneurs fear being held legally

10. 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 form of
corporation. It protects the entrepreneur from
being
personally sued for the actions and
debts of the
corporation.
•Subchapter S corporation: A corporation that is

12. 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
their investments.
•People can easily enter or leave the business

13. Disadvantages of corporations
•Legal assistance is needed to start a
corporation.
•Start-up is costly.
•Corporations are subject to more
government
regulations than partnerships

14. Alternate approaches to starting a
business
•Buy an existing business.
•Enter a family business.
•Own a franchise business.

15. Advantages of buying an existing
business
•Existing businesses already have
customers, suppliers, and
procedures.
•Seller of the business may be willing to

16. Disadvantages of buying an existing
business
•Business may be for sale because it is not
making a
profit.
•Problems may be inherited with the
purchase

17. Advantages to 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.

18. Disadvantages to 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

19. Own a franchise business
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 agreement.
Franchisor: The person or company who
sells a franchise.
Initial franchise fee: The fee the franchise
owner pays in return for the right to run
the business.

20. Advantages of purchasing a franchise
business
An established product or service is being
provided.
Franchisors often offer management, technical,
and other assistance.
Equipment and supplies may be less

21. Disadvantages of purchasing a franchise
business
The cost of franchises may be high, which can
reduce profits.
Franchise owners are limited in the decisions they
can make regarding the business.
The performance of other franchises impact on the