FORMS OF OWNERSHIP BUSINESS ESSENTIALS J. TURNER
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
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 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 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 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 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 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 Prentice Hall 6 -12
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 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!!
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