Forms of Business Ownership

Advantages of a Franchise

- An established product or service is being provided - Franchisors often offer management, technical, and other assistance - Equipment and supplies may be less expensive - A guarantee of consistency attracts customers

Alternate approaches to starting a business

- Buying an existing business - Enter a family business - Own a franchise business

Advantages of a Corporation

- Can raise money by issuing shares of stock - Offers owners limited liability - Limited Liability: Owners are liable only up to the amount of their investments - People can easily enter or leave the business by buying or selling their shares of stock - The business can hire experts to professionally manage each aspect of the business

Advantages of a Sole Proprietorship

- Easy and inexpensive - Owner makes all business decisions - Owner receives all business decisions - Least regulated form of business ownership - Business itself pays no taxes

Disadvantages of a Corporation

- Legal assistance is needed to start a corporation - Start-up is costly - Corporations are subject to more government regulations than partnerships or sole proprietorship - A lot of paperwork is involved in running a corporation - Income is taxed twice

Disadvantages of a Sole Proprietorship

- Owner has unlimited liability for all debts and actions of the business - Difficult to raise capital - Sole proprietorship is limited by his/her skills and abilities - The death of the owner automatically dissolves the business

Disadvantages of a partnerships

- Partnerships may lead to disagreements - Some entrepreneurs are not willing to share responsibilities and profits - Some entrepreneurs fear being held legally liable for the error of their partners - Each owner has unlimited liability

Advantages of a partnership

- Shared decision making and management responsibilities - Easier to raise capital than in a sole proprietorship - Few government regulations - Business losses are shared by all partners

Disadvantages of a Franchise

- The cost of franchises may be high, which can reduce profits - Franchise owners are limited in the decisions they can make regarding the business - The performance of other franchises impact on the franchisee - The franchise agreement may be terminated by the franchisor

Sole Proprietorship

A business owned and operated by one person Fact: Approximately 76% of all businesses in the US are sole proprietorships

Corporation

A business that is chartered by a state and legally operates apart from its owners

Subchapter S Corporation

A corporation that is taxed like a sole proprietorship or partnership

Partnership

A form of business ownership in which two or more people share the assets, liabilities, and profits

Franchise

A legal agreement that gives an individual the right to market a company's products or services in a particular area

Limited Liability Company

A new form of business ownership that provides limited liability and tax advantages

General Partnership

A partnership in which all partners have unlimited personal liability and take full responsibility for the management of the business

Limited Partnership

A partnership in which the partners' liability is limited to their investment

Strategic Alliance

A partnership in which two businesses work together for mutual benefit

Joint Venture

A partnership in which two companies join to complete a specific project. The partnership ends after a specified period of time

Franchisee

A person who purchases a franchise agreeme

Types of Corporations

C-Corporation, Subchapter S Corporation, Nonprofit Corporation, Limited Liability Company

Types of Partnerships

General Partnership, Limited Partnership, Joint Venture, Strategic Alliance

Nonprofit Corporation

Legal entities that make money for reasons other than the other's profit

What are the three basic forms of business ownership?

Sole Proprietorship, Partnership, Corporation

Unlimited Liability

The debts of the business may be paid from the personal assets of the owner

Initial Franchise Fee

The fee the franchise owner pays in return for the right to run the business

C-Corporation

The most common form of corporation, it protects the entrepreneur from being personally sued for the actions and debts of the corporation

Franchisor

the person or company who sells a franchise