BUSINESSBUSINESS STRUCTURESSTRUCTURES

Types of Business Structures

Sole Proprietor Partnership

General PartnershipLimited PartnershipLimited Liability Partnership

Corporations Others (Franchises, Co-ops, Nonprofits)

ADVANTAGES OF BEING A

SOLE PROPRIETOR

EASY START UPFEW GOV’T. REGULATIONS AND BARRIERS TO ENTRY

GETS ALL THE PROFIT

It is by FAR the most popular type of firm.

FULL CONTROL AND DECISION MAKING

EASY TO DISCONTINUE

DISADVATAGES OF BEING A

SOLE PROPRIETOR

UNLIMITED PERSONAL LIABILITY (business and personal assets can be taken to pay debt)

LACK OF PERMANENCEIF THE OWNER DIES, THE BUSINESS COULD DIE TOO.

LIMITED RESOURCESONE PERSON, ONE SOURCE OF CAPITAL (money)

RESPONSIBILITY AND TIME COMMITMENT RESTS ON ONE PERSON

THREE TYPESOF

PARTNERSHIPS

General Partnership:All partners are financially

responsible for debt and liability.All may be sued professionally and

personally

Limited Partnership:One partner has unlimited

liability and can be sued professionally and personallyOther partners have limited

liability and can only lose professional assets

Partners, however, are not equal in sharing profits

Limited Liability Partnership:All partners have limited liability and

none can be sued for personal assets…only professional

These forms of partnerships need government approval

Ex: Medical offices and law firms

ADVANTAGES OF PARTNERSHIPS

EASY START UPFEW GOV’T. REGULATIONS AND BARRIERS TO ENTRY

SHARED DECISION MAKING AND SPECIALIZATION

LARGER POOL FOR FUNDING

NO SPECIAL TAXES

DISADVANTAGES OF PARTNERSHIPS

UNLIMITED LIABILITY

Limited Liability Partnership:All partners have limited liability and

none can be sued for personal assets…only professional

These forms of partnerships need government approval

Ex: Medical offices and law firms

PERSONAL CONFLICT

ADVANTAGES OF CORPORATIONS

http://www.nyse.com/about/listed/lcddata.html?ticker=YUM

LIMITED PERSONAL LIABILITY FOR STOCKHOLDERS (personal assets cannot be taken away)

OWNERSHIP IS TRANSFERABLE

(you may sell it when you want)

THE COMPANY CAN ATTRACT CAPITAL QUICKLY BY SELLING STOCK

LONG LIFE (Corporations can live forever, beyond life of founder)

DISADVANTAGES OF CORPORATIONS

DIFFICULT AND EXPENSIVE TO START-UP

DOUBLE TAXATION (corporate and dividend)

LOSS OF CONTROL FOR FOUNDER

A LOT OF GOV’T. REGULATIONS

CORPORATE COMBINATIONS

HORIZONTAL MERGERCOMPANIES FROM SAME INDUSTRY JOIN TOGETHER

MERGERS

VERTICAL MERGERCombination of two or more firms involved in different stages of producing the same good or service

CONGLOMERATEBusiness combination

of more than 3 businesses that make

unrelated products

MULTINATIONAL

CORPORATION THAT OPERATES IN MORE THAN ONE COUNTRY

_____ ____________________

Other Types of Organizations

Cooperative (Co-op): Business organization owned and operated by a group for their benefit.

Non-profit: Usually in the business of benefiting society.

FRANCHISE

CORPORATION THAT SELLS ITS NAME FOR A FEE TO INDEPENDENT OWNERS

• What do you normally think of?

PROS OF FRANCHISE CORP.

BUILT IN REPUTATION MANAGMENT AND TRAINING SUPPORT

…MORE PROSSTANDARDIZED QUALITY THAT PEOPLE TRUST

NATIONAL ADVERTISING

…EVEN MORE PROSFINANCIAL ASSISTANCE FROM

MOTHER CORP.CORP. BUYS IN BULK SAVING

MONEY FOR FRANCHISE OWNER

CONS OF FRANCHISESHIGH FEE AND ROYALTY PAYMENTS

STRICT STANDARDS OF OPERATION

…MORE CONSPURCHASING RESTRICTIONS (you must buy from mother corp.)

LIMITED PRODUCT LINE (can’t develop own goods)

Dunkin' DonutsCost of Franchise: $40,000 to $80,000

Average total start up costs vary depending on location. 

KFCCost of Franchise: $45,000

Average total start up costs: From 1 to 3 million US$.Further details on KFC Franchise Opportunity USA

McDonald's Franchise USACost of Franchise $45,000

Average running costs $950,000 to $1,800,000

Massage EnvyCost of Franchise $39,000

Average Start up costs $290,000 to $470,000

Pizza HutCost of Franchise: $25,000

Average total start up costs: From 210 thousand to 3 million US$, depending on location and size of store.

Snap-On ToolsCost of Franchise: From $5,000 to $15,000

Average total start up costs: From $17,000 to $280,000

SubwayCost of Franchise: $15,000

Average total start up costs: From 80 to 240 thousand US$, depending on location.

SupercutsCost of Franchise: $22,500

Average total start up costs: From 110 to 240 thousand us$