DOCUMiNT RESUME ED 128 502 CE 035 696 AUTHOR Ashmore, M. Catherine; Pritz, Sandra G. TITLE ChooSing the Type of OwnershipsPACE Revised. Level 2. Unit 5. Research & Development Series No. 240BB5. INSTITUTION Ohio State Univ., Columbus. National Center for Research in Vocational Education. SPONS AGENCY Office of Vocational and Adult Education (ED), Washington, DC. PUB DATE; 83 CONTRACT 300-78-0032 NOTE 21p;; For related documents, see CE 035 672-729. AVAILABLE FROM-National,Center Publications, Box F, The Ohio State University, 1960 Kenny Road, Columbus, OH 43210 (Complete set--$1 2.00; individual levels--$45.00 each; instructors uides--$14.50 each; resource guide--$7.95; modul -sets--$35.00 each level; individual mcidules--$2.-50 each). PUB TYPE Guides Classroom Use Materials (For Learner) (051) EDRS PRICE MF01/PC01 Plut Postage. DESCRIPTORS Administrative Principles; Adult Education; Behavioral Objectives; Business Administration; *Business Education; *Business Skills; CareerChoice; Cooperatives; Educational Resources; *Entrepreneurship; Learning Activities; 'Learning Modules; Management Games; Managerial Occupations; Postsecondary Education; Secondary Education; *Small 'Businesses; Units of Study IDENTIFIERS Corporations; Franchising; .*Ownership; Partnerships; *Program for Acquiring Competence Entrepreneurship; Sole Proprietorships ABSTRACT This unit on choosing the type of ownership of a small business, the fifth in,a series of18 modules, is on the second ,level of the revised PACE (Program forAcquiring Competence in Entrepreneurship) comprehensive curriculum. Geared toadvanced secondary and beginning postsecondary or adultstudents, the modules provide an opportunity to learn about and try outentrepreneurship ideas so that students can makea'preliminary assessment Of how these ideas relate to personal needs. The unitson,this level contain detailed explanations of small businessprinciples, suggestions on how to find information and use techniques,and encouragement for creating a future business. Students completingthiS unit should be able to perform these competencies: (1)explain the basic princtples of a sole proprietorship, a partnership, acorporation, a I cooperative, and a franchise; (2) identify thefactors that influence the choice of a type of ownership; and(3) investigate sources of assistance in choosing a type of ownership.The unit is organized into five sections. Followrhg a preliminarysection on how,to use the unit (with vocabularyand a review of theobjectives for this topic on level 1), the unit'sinformation is presented in question-and-answer format. Individual and groupactivities, an assessment to be completed with theteacher, and sources used to develop the unit follow. A list of themodules of Revised PACE, Level 2 completes the unit. (KC) 11 UNIT 5 Level 1 REVISED Program for Vtevel2 CD Ac'quiring Competence in n Level 3 co EntrepreneUrship r\J Choosing the Type of Ownership Developed by M. Catherine Ashmore andSandra G. Pritz You will be able to: Explain the basic principlesof'a sole proprietorship, a partnership, a corporation, acooperative, and a, franchise. identify the factors thatinfluence the choice of a typeof ownership: investigate sources ofassistance in choosing a typeof ownership.. U.S. DEANTMENT OF EDUCATION NATIONAL INSTITUTE OF EDUCATION E OUCA (IONA( RESOURCES INFORMATION CEN TER (ERIC/ L/This rloolmoritha, boon rnproriticertOs ler.nive$1horn the pernon ororganization Originating it Minor1141119PS /MVO 1410)1 rri,j tO 1111111001. I011106.1(.10Wqudlov Porotc of wow hiopinions sweat in this ro.ol do no) net ib5ti.mly tvfnosent otficwINIE. pOsition !Joh( y Research & Development Series No. 240BB 5 THE NATIONAL CENTER FON RESEARCH IN VOCATIONAL EDUCATION THE OHIO STATE uNNERSIT 1960 KENN% ROAD COLL/TAUNUS 00110 432TO BEFORE YOU BEGIN.. 1. Consult thedourceGuide for instructions if this is your first PACE unit. 2.Read the Unit Objectives on the front cover. If you think you can meet these objectives now, consult your instructor. 3.These objectives were met at Level 1: Describe sole proprietorships, partnerships, corporations, cooperatives, and franchises Identify examples from your own community of each of the typeg of business ownership \ Describe the advantages and disadvotages of proprietorships, partnerships, corporations, franchises, and cooperatives 0 If you feel unsure about any of these topics, ayour instructor for materials to review them. 4.Look for these business terms as you read this unit: f you need help with their meanings, turn to the Glossary in the Resource Gui articles of copartnership exclusive selling agreement' net worth 2 CHOOSING THE TYPE OF OWNERSHIP WHAT IS THIS UNIT ABOUT? It would be simple if the decision about the form of organization for your business were as easy as choosing among sole proprietorship, partnership, corPoration, franchise, or cooperative. But there are different types of partnerships and corporations. More decisions need to be made once you decide on the main form of organization for your = business. The main purpose of this unit is to examine some of the principles of different types of ownership, factors that influence choice, and sources of assistance in choosing a type of ownership. WHAT IS A SOLE The most common form of business organization is thesole PROPRIETORSHIP? proprietorshipsometimescalled the individual proprietorship. This0 business is owned by one person. It is usually operated-by this person. Many times, though, it is run with the help of a few employees, often' family members. Sole proprietorships can usually operate with very limited capital resources (money). Sole proprietorships exist in a great variety of businesses. These may include the neighborhood beauty parlor, bike repair shop, restaurant, newsstand, and accounting office. The sole proprietorship is the least complicated form of organization. It is the easiest to enter and terminate. Entry requires little more than a location, expertise-in the area of business considered, a source of capital, the ability to make contracts, and the desire to.start your own business. Terminating generally requires paying your debtsand closing your doors. WHAT IS A PARTNERSHIP? Next to the sole proprietor,ship, thepartnersh ipis the least complicated way to begin and operate a business. A partnership is a business that has two or more (usually not more than five) co-owners. Often, but not always, a partnership is formed when a sole proprietor takes on additional owners. These additional owners help in certain areas of expertise or skill. They may also aid in expanding the , business by raising additional capital as there is a limit to what one person can borrow. Partnerships are found in every type of business including law and medical firms. Forming a.partnership may be the answer for many businesses, especially those that require moreinitial capital than one person can raise alone. Several types of arrangements can be made with a potential partner. For example, not all partners want to have equal ownership and responsibility. They may desire to be a limited partner. Most limited partners invest in, a business. They do not have a voice in management. WHAT 18 A CORPORATION? Another type of ownership is the corporation.Sole proprietorships outnumber corporations in the total number of U.S.businesses. But in the number of dollars earned and peopleemployed, the corporation is the largest form of business organizationin the United States today. The corporation is an association of three or more ownersthat is chartered by a state.It is given the power to transact business, to enter into contracts, and to sue oe be suedas a legal entity. The corporation acts on its own through its officers. They have power to make contracts and carry out bu'siness activities.These are done in the same manner as a sole proprietorship orpartnership. Thus, a corporation is an entity ci'eated through state laws for the purposeof doing business. The owners of a corporation are the stockholders. The numbersof stock certificates they purchase determines the extent of their ownership. After the corporation has been chartered, thestockholders must elect a board of directors. The board ofdirectors appoints the officers or managers of the business. Yorming a corporation offers advantages to those who needlots of capital, but it requires a large amount of extra capital to startand to operate. The corporation is not suitable for allbusinesses. However, it is an important part of the American economic system. WHAT ARE COOPERATIVES? Acooperativeis an organization of individuals with similar interests and problems who have joined together to perform certainactivities. Although cooperatives are not a legal form of ownership, theydo represent a structure owned and directed by its own customers (members). The formal ownership structure for most cooperativesis similar to that of a corporation. A cooperative is financed byselling shares to its members to whom it,distributes profits(dividends). The rate of distribution of profits and even thesystern for sharing profits among all members vary greatlyfrom one co-op to another. Most cooperatives form to serve the needs of a group moreeffectivelye. Since a group acting Collectively can sometimes serve itsmembers' needs more effectively than individuals acting alone, cooperatives are more important in somefields than others. For example, farming cooperatives are important organizations. , There aretnany different forms of cooperatives. Some of the more common cooperatives are: Food co-ops