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Business Ownership & Operations
Ch.6 – GlencoeCh. 19, 35 & 40 - NFTE
Sole Proprietorship – is a business owned by only one person
Partnership – is a business owned by two or more people
Corporation – is a business owned by many people but treated by law as one person
Franchise – is a contractual agreement to sell a company’s products or services in a designated geographic area
Types of Business Ownership
Relatively easy to start Owners pay Personal Income Tax on the business’s
earnings Fewer government regulations than for the other
forms of business Can make quick decisions and act without
interference from others Keeps all the profits from the business
Sole ProprietorshipAdvantages
Can be difficult to raise enough money by oneself to start or expand the business
Must often put in long hours There is unlimited personal legal liability from
lawsuits related to the business Unlimited Liability - full responsibility for your
company’s debts No one to offer encouragement or feedback The odds of failure are high
Sole ProprietorshipDisadvantages
Limited Partnership- have no say in the daily operations of the business and have, as a result, limited liability
Financing can be easier to secure Business risks, long hours, and legal liabilities are
shared Different skills and contacts are brought into the
business
PartnershipAdvantages
Profits must be shared Although shared, legal liability still includes personal
property Disagreements among the partners can destroy the
business Can be difficult and unpleasant to dissolve
PartnershipDisadvantages
Caution:Low-Flying FishNestled between the Waterfront on First and Pike find Seattle’s famous Pike Place Market. Merchants, travelers, and regulars have frequented this open-air market since 1907. In 1973, the Pike Place Merchants Association (PPMA) became officially incorporated as a nonprofit membership organization.
What’s the aim of joining forces and starting an
organization?
To raise money you can sell stock Stock – shares of ownership in your corporation
Limited liability (and legal liability) – the personal assets of the officers or stockholders cannot be used to pay corporate details
Ownership can be transferred easily
CorporationAdvantages
Are more heavily taxed than sole proprietorships or partnerships Taxed twice: first, as the income of the corporation; and
two, as dividends to the stockholders (must be declared as personal income on taxes)
Founder of a corporation (original entrepreneur) can lose control to the stock holders and board of directors, if they no longer own more than half the stock
Is more expensive Are subject to many government regulations
CorporationDisadvantages
Steve Jobs, Apple Computers Co-founder Board of Directors fired him Later, asked him to return to the company Most recently, stepped down to President,
and Tim Cook is now CEO
Entrepreneur Spotlight
Subchapter-5 Corporation – the company must have fewer than 75 stockholders, no corporate, partnerships or non-resident alien shareholders, and non shareholders who are not U.S. citizens Offers the legal protect of a C Corporation and without double taxation
Professional Corporation - Doctors, lawyers, architects, and other professionals can also incorporate themselves. The initials “P.C.” after a person’s name indicate this
Nonprofit Corporation – aim to contribute to the greater good of society and are not seeking to make a profit Also called 501(c )(3) corporations
C Corporation – sell ownership as shares of stock Most big companies, stockholder vote on important company
decisions, and to raise capital can sell more stock
Four Types of Corporations
1. What are some of the advantages of a sole proprietorship?
2. What is the difference between a sole proprietorship and a partnership?
3. If a partner makes a bad decision, what responsibility do the other partners have?
4. What are the disadvantages of a corporation?
Review
Franchisor - person who teaches the business, and provides support and supplies Growth with minimal capital investment Lower marketing and promotion costs Royalties – usually a percentage of the franchise’s sales is paid to
the franchisor Franchisee – the people who buy a franchise of a particular
business Ownership of a business with less risk than is involved in starting a
business alone Help with management and training Advertising – the franchise chain can afford multiple platforms that
the small-business owner could not finance alone
FranchiseAdvantages
Franchisor The franchisee may disregard the training and fail to operate
the business properly, tarnishing the reputation of the franchise and the brand
It can be difficult to find qualities or trustworthy franchisees Franchisees who do not experience success may try to sue the
franchisor Franchisee
Giving up control – much of the franchise’s operations are dictated by the franchisor
The franchisor may fail to deliver the promised training and support
The franchisor may engage in poor business practices that affect the earnings or image of the franchise
FranchiseDisadvantages
Ray Kroc, McDonald’s Opened in Des Plaines, Illinois, in 1955 First franchisor to provide in-depth training to
franchises Almost guaranteed all restaurants would taste the same
By 1983, was a $3 billion dollar company with 7,778 locates in 30 countries
Turned a simple idea in an internationallyrecognized symbol of American enterprise
Entrepreneur Spotlight
Caution:Low-Flying FIshAt 86 Pike Place, you’ll find the world-famous fish-flingers at Pike Place Fish. In 1965, John Yokoyama purchased it because he needed the money to make his car payments.
What’s the benefit of going into business for
youself?
Nonprofit Organization – is a type of business that focuses on providing a service, rather than making a profit Has to register with the government Doesn’t have to pay taxes Rely on government grants and donations from
individuals or businesses Donors do not get dividends like investors, but can
deduct donations from their taxes
Alternative Ways to Do Business
Cooperative – is an organization owned and operated by its members for the purpose of saving money on the purchase of certain goods and services Can sell stock and choose a board of directors Pool resources to save money on buying insurance,
supplies and advertising Share factory facilities and warehouse space Pay less in taxes
Alternative Ways to Do Business
Richard Hesse, E. Gunnard Lindquist, Frank Burke, & Oscar Fisher, Ace Hardware Co-foundered in 1924 Started as a cooperative Allowed smaller stores to buy in bulk to
compete with larger stores Currently has 4,400 stores that are
franchised and operated by a community member
Entrepreneur Spotlight
1. What are some examples of franchise businesses?
2. What types of assistance does the franchisor give a franchiser?
3. How is a nonprofit organization like and unlike a corporation?
4. What are some advantages of a cooperative?
Review
Caution:Low-Flying FishPike Place Fish didn’t become world famous by advertising. (Instead a Spike Lee Levi’s commercial, NBC’s Frasier, and MTV’s Real World helped expose the market.) Pike Place prides itself on interacting with the people. The staff wants to give each person a memorable experience.
Can a business have a contractual agreement
with its customers?
Producer – is a business that gathers raw products in their natural state.
Processor – change raw materials into more finished products
Manufactures - are businesses that make finished products our of processed goods
Intermediary – is a business that moves goods from one business to another Wholesale – distributes goods Retailer – purchases goods from a wholesaler and resells
them to the consumer, or final buyer Service – provide services rather than goods
Types of Businesses
Caution:Low-Flying FishYokoyama has such a strong desire to empower other business leaders that he’s formed a consulting team. His commitment to his people and his customers is one model other businesses are learning in corporate training videos.
What area does Pike Place Fish focus on other
than fish?
1. What is the difference between a producer and a processor?
2. What does an intermediary do?
3. Give examples of service business.
Review