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FORMS OF OWNERSHIP BUSINESS ESSENTIALS J. TURNER FORMS OF OWNERSHIP BUSINESS ESSENTIALS J. TURNER

SMALL BUSINESS • Independent business with fewer than 500 employees • 99. 9% of SMALL BUSINESS • Independent business with fewer than 500 employees • 99. 9% of ~26 million US businesses • Responsible for 60 -80% of all new jobs • Owner = Manager • One or few locations • Small market • Not dominant in field

© Prentice Hall, 2007 Excellence in Business, 3 e © Prentice Hall, 2007 Excellence in Business, 3 e

SOLE PROPRIETORSHIP • Owned by one person • Easiest and least expensive • Examples: SOLE PROPRIETORSHIP • Owned by one person • Easiest and least expensive • Examples: • • Farms Retail establishments Small service businesses Home based businesses (caterer, consultant, computer programmers)

Sole Proprietorship Advantages Disadvantages ü Ease of establishment ü Unlimited liability ü Self-satisfaction ü Sole Proprietorship Advantages Disadvantages ü Ease of establishment ü Unlimited liability ü Self-satisfaction ü Personal pressure ü Privacy ü Difficult to get funding ü Tax advantages ü Limited life © Prentice Hall, 2007 Excellence in Business, 3 e

Partnership Advantages Easy to Establish Tax Advantages Strength in Numbers Diversity of Skills Increased Partnership Advantages Easy to Establish Tax Advantages Strength in Numbers Diversity of Skills Increased Capital Extended Life © Prentice Hall, 2007 Excellence in Business, 3 e Chapter 5 - 7

PARTNERSHIP DISADVANTAGES Unlimited Liability Debts © Prentice Hall, 2007 Interpersonal Problems Law Suits Managing PARTNERSHIP DISADVANTAGES Unlimited Liability Debts © Prentice Hall, 2007 Interpersonal Problems Law Suits Managing Partner Excellence in Business, 3 e Unproductive Partners Chapter 5 - 8

CORPORATIONS Enter Into Contracts Buy and Sell Property Sue and Be Sued Face Limited CORPORATIONS Enter Into Contracts Buy and Sell Property Sue and Be Sued Face Limited Liability © Prentice Hall, 2007 Excellence in Business, 3 e Chapter 5 - 9

Corporations Advantages Disadvantages Access to capital Excess paperwork Limited liability Burdensome Increased liquidity Double Corporations Advantages Disadvantages Access to capital Excess paperwork Limited liability Burdensome Increased liquidity Double Unlimited life span Disclosure © Prentice Hall, 2007 Excellence in Business, 3 e costs taxation requirements Chapter 5 - 10

THE FRANCHISING ALTERNATIVE • Product franchise • Manufacturing franchise • Business-format franchise © 2007 THE FRANCHISING ALTERNATIVE • Product franchise • Manufacturing franchise • Business-format franchise © 2007 Prentice Hall 6 -12

EVALUATING A FRANCHISE • Initial franchise • Exclusive territory • Periodic royalties • Right EVALUATING A FRANCHISE • Initial franchise • Exclusive territory • Periodic royalties • Right of first refusal • Trademarks and names • Equipment and supplies • Advertising and • Agreement termination promotion • Franchise agreement • Business location © 2007 Prentice Hall 6 -13

PROS AND CONS OF FRANCHISING Advantages Disadvantages v Get a viable business v No PROS AND CONS OF FRANCHISING Advantages Disadvantages v Get a viable business v No guarantee of wealth v Name recognition v High monthly royalties v Network of support v Limited independence v Blueprint for success v Limited flexibility © 2007 Prentice Hall 6 -14

THE END!! THE END!!