Types of Business Ownership



Types of Business Ownership

Every business can be identified as to a type of ownership based upon who actually owns the company.  After reading scenarios of different business, you will be asked to determine which type of business ownership is represented and to support your answer from the information you have learned in this objective.

In this activity you will decide

1. Which type of ownership is represented in each scenario and

2. Give details to support your answer

Scenario 1

Phillip and his sister, Leslie, have decided to start an online business selling parts to automobiles. He loves to visit junk yards and feels he can locate parts that other people would be interested in buying. With his love for and knowledge of cars, he thinks he can identify parts that will have a resale value. However, Leslie has the skills to create and publish web pages. He needs her skills in order to start his business. Each has agreed to contribute to the business. Leslie has the equipment valued at approximately $2000. Phillip has $4000 to contribute in cash. Based on their contribution, Leslie will receive 1/3 of the profits while Phillip will receive 2/3.

Scenario 2

Realizing the need for support for our troops overseas, three friends decided to start a business to collect goods and donations to purchase needs of our troops. After contacting several branches of the military for information concerning the needs of the troops, the three realized it was a larger task than anticipated. Rather than abandon their idea, they decided to solicit support from local residents. People could contribute money and the company would, in turn, obtain the items needed by our troops. The three would run the company and receive a salary for their efforts, but all profits would be returned to the company to purchase additional goods. After several months of advertising and promoting their business contributions began to be received. The needed legal documents were obtained and a new business was begun.

Scenario 3

Janet found an article in the paper of a company that has a new makeup product to go on the market. It is designed to help people who have major disfigurations. The company is looking for people to join in their venture by making cash donations. Each person contributing will sign a business agreement and other required legal documents. The startup investment needed will be $125,000. Each investor will receive income based upon the amount of their investment of the $125,000. If you contributed $5,000, you would receive 4% of the net profit as a return. Each investor would be given a document indicating their share of ownership. Returns would be given at the end of 1 year of business.

Scenario 4

 You are considering purchasing a business that is for sale in your hometown. This is your opportunity of becoming a business owner by purchasing an existing business. Mr. Jacobs, the present owner, wishes to retire so he is looking for someone to purchase his business including the inventory and shop. After some market research and auditing his books, you decide to purchase the business.

Scenario 5

Two college students have created a testing program that they feel is far superior to any their college professors have been using. To create the program, they invested in computer equipment and used their apartment as a place to work on their new product. They found that they had spent all of their time, money and energy in creating the new software program but had no resources left to use to market their product. While they had the opportunity to sell their product to a software company, they felt that they could turn a larger profit by marketing the product themselves.

The two students developed a business plan and presented demonstrations to professors in various departments looking for investors to start the new business. They also researched the legal aspects of starting the business with investors and obtained the documents needed and established a name. Each person who invested would receive a part of the profits made. According to the startup documents, the two students would be hired to run the operation.

Scenario 6

Your family owns a restaurant in town. You are trying to talk them into opening a new restaurant across town near the university. You would be willing to run the new restaurant as a part of their business. With extra or old equipment, startup costs would be relatively low. Being new to the business, you will receive pay based upon a percent of the profit of the new restaurant. The family will also receive a percent of the profit for their support of the new restaurant.

Scenario 7

Sarah decided on a hot day in July that she wanted to sell lemonade on her street from 4:00 until 6:00 when neighbors and friends were returning home from work.  She talked with her mother about her plan.  She and her mom figured what it would cost her to make a gallon of lemonade and the cost for cups and ice.  They then calculated how much she would need to charge for each cup.  Sarah had to pay for her supplies but any money left was her profit.

Scenario 8

Josh’s brother-in-law has a small motorcycle repair shop that has been open for 3 years. He would like to expand his shop but needs additional funding to obtain a larger building and additional equipment. He has approached Josh about investing and working with him in the business. Training would also be part of the plan. He has offered to have his books audited to determine the value of his business. Based on this information, both gentlemen will determine the amount that would need to be contributed to have an equal share of the business. [pic][pic][pic]

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