ch 5 powerpoint

sole proprietorship

a business owned, and usually managed by one person

major disadvantage of corporation

double taxation.

Advantage of franchise

youre your own boss. Brand recognition (you don't have to do the advertising) (like you can open a mcdonalds, but everyone already knows what mcdonalds is)

limited vs general partner

A general partner is an owner who has unlimited liability and can be active in managing the firm. A limited partner is an owner who invests money in the business, but does not have any management responsibility or liability for losses beyond his or her investment.

benefits of sole proprietorship

ease of starting and ending the business. being your own boss, pride of ownership, leaving a legacy, retention of company profit, no special taxes

limited liability company advantage

limited liability and flexibility

advantage of s corporation

that it avoids the double taxation of a C corporation. Approximately 3 million U.S. companies operate as S corporations.

advantages of corporations

limited liability, ability to raise money for investment, size, perpetual life, ease of ownership change, ease of attracting talented employees, separation of ownership from management

disadvantages entrepreneurs

limited life span and paperwork

merger

the result of 2 firms joining to form one company

Advantages and disadvantages incorporating a business include

Limited liability, ability to raise more money for investment, size, perpetual life, ease of ownership change, ease of attracting talented employees, separation of ownership from management. Disadvantages of incorporating are: Initial cost, extensive paperwork, double taxation, two tax returns, size, difficulty to terminate, possible conflict with stockholders and board of directors.

What opportunities are available for starting a global franchise?

Successful franchising in global markets offers the same opportunities as in domestic markets. However, franchisers must be careful to adapt to the region where they wish to expand. McDonald's for example has more than 33,000 restaurants in 119 countries.

conventional corporation

a state chartered legal entity with authority to act and have liability separate from its owners (its stockholders)

types of partners

general and limited

forms of partnerships

master and limited

disadvantages of partnerships

unlimited liability, division of profits, disagreements among partners, difficult to terminate

disadvantages of sole proprietorships

unlimited liability, limited financial resources, management difficulties, overwhelming time commitment, few fringe benefits, limited growth, limited life span

What are some of the factors to consider before buying a franchise?

Before buying a franchise be sure to check a company's (franchisers) resources and reputation. There are many franchising scams. The checklist in this chapter gives advice about things to consider before buying a franchise.

Each type of partnership has advantages and disadvantages.

In a general partnership resources are pooled and liability is spread among all partners. However, in this type of partnership there is the possibility for disagreement and/or personality conflicts. A limited partnership is made up of a mixture of general partners and limited partners. Limited partners cannot actively take part in business dealings.

Why are so many new businesses choosing a limited liability company (LLC) form of ownership?

Limited liability companies have become a popular way to form a business since all fifty states now recognize LLCs. Some of the advantages of LLCs are: Limited liability, choice of taxation (can be taxed as a partnership or corporation), flexible ownership rules, flexible distribution of profit and losses, operating flexibility.

advantages and disadvantages of partnerships

Some of the advantages of partnerships are: More financial resources, shared management and pooled/complementary skills and knowledge, longer survival, no special taxes. Disadvantages of partnerships include: Unlimited liability (for general partners), division of profits, disagreements among partners, difficulty of termination.

What's the role of owners (stockholders) in the corporate hierarchy?

Stockholders do not have to be employees of the corporation. They are investors who have limited liability. Stockholders elect the board of directors of a company who select the management to control the company.

If you buy stock in a corporation and someone gets injured by one of the corporation's products, can you be sued? Why or why not?

Stockholders in a corporation have limited liability meaning as owners they are responsible for its losses only up to the amount they invested. The corporation could be sued and forced out-of-business but the stockholder would only lose what he/she invested.

cooperative

a form of business that is owned and controlled by the people who use it—producers, consumers, or workers with similar needs who pool their resources for mutual gain. Cooperatives are a major force in agriculture and other industries today.

corporation

a legal entity with authority to act and have liability apart from its owners

master limited partnership

a partnership that looks much like a corporation, but is taxed like a partnership and thus avoids the corporate income tax

s corporations

a unique government creation that looks like a corporation, but is taxed like sole proprietorships and partnerships. have shareholders, directors and employees, plus the benefit of limited liability. profits are taxed only as the personal income of the shareholder

Advantages and disadvantages sole proprietorship

advantage: own hours. Own boss. Own salary. Easy to start and easy to end. You take out a loan personally (like the business doesn't take out a loan you yourself do), no special taxes. Disadvantage: if you loose all your money, its on you (unlimited liability). 24/7. difficult to raise capital (raise money, like the bank would say why should I give you a money on a loan). Talent (you have to do your own marketing). Limited resources .

franchise agreement

an agreement where by someone with a good idea for a business (franchiser) sells the rights to use the business name and sell a product service (franchise) to others (franchisees) in a given territory

general partner

an owner (partner) who has unlimited liability and is active in managing the firm

unlimited liability

any debts or damages incurred by the business are your own debts, even if ti means selling your home, car, or anything else

corporations

don't have to be huge. People corporate because they have limited liability. The only thing that people can take from you is the thing that the business owns. People cannot sue you yourself, but they can sue the corporation. Disadvantage of corporation: is that its difficult to get started. Its more difficult than a sole proprietor, there's more paperwork more fees. Really easy to change ownership.you're working for somebody. Everybody works for somebody. Corporation advantage: you have the ability to sell stocks and bonds. corporations don't have to be publicly traded

general partnership

everybody's liable for everything. all owners share in operating the business and in assuming liability for a businesses debt

The limited partner is not able to

exercise any management control over the partnership, but maintains limited liability. A limited partner's liability is limited to the amount invested in the partnership.

types of partnerships

general and limited

qualifications of S corporations

have no more than 100 shareholders. have shareholders that are individuals or estates and are citizens of permanent residents of the US, have only one class of stock, derive no more than 25% of income from passive sources. if an S corporation looses its s status, it may not operate under it again fro at least 5 years

disadvantages of corporations

initial cost, extensive paperwork, double taxation, two tax returns, size, difficulty of termination, possible conflict with stockholders and board of directors

The major advantage of corporate ownership

is limited liability protection (personal assets are protected).

Disadvantage of franchise

it's a bigger risk. You don't have all the people rooting for you (you're the enemy) you're on your own. If you don't franchise you don't know if your business will be successful.

disadvantages of franchising

large start up costs, shared profit, management regulation, coattail effects, restrictions on selling, fraudulent franchisers

limited liability

liability for the debts of the business is limited to the amount of the limited partner puts into the company; personal assets are not at risk

advantages of limited liability companies

limited liability, choice of taxation, flexible ownership rules, flexible distribution of profits and losses, operating flexibility

limited liability partnership

limits partners risk of losing their personal assets to the outcomes of only their own acts and omissions and those of people under their own acts and omissions and those of people under their supervision

advantages of franchising

management and marketing assistance, personal ownership, nationally recognized name, financial advice and assistance, lower failure rate

advantages of partnerships

more financial resources, shared management and pooled/complementary skills and knowledge, longer survival, no special taxes

disadvantages of limited liability companies

no stock, therefore ownership is nontransferable, limited life span, fewer incentives, taxes, paperwork

acquisition

one company purchase of the property and obligations of another company

Limited partnership

opportunity for you to have a partner who gives you money invests in your partnership but doesn't work in the business at all. They provide money and they don't help you run the business. The advantage is that they get limited liability. Limited partners have limited liability. They can invest in your business but if something happens and the business doesn't work out great, we cant go after their house, we cant go after their bank account. The only thing they would loose is the amount of money they invested in the first place. a partnership with one or more general partners and one or more limited partners

limited partner

owner who invests money in the business but also enjoys limited liability

partnership advantages

partnership agreement (specify how new partners are brought in, how are we going to terminate partnership if someone gets killed or something)

partnership advantage

partnerships have access to more resources, such as financial resources, management skills and knowledge

limited partner cannot help you

run a business

limited liability company

similar to an S corporation, but without the eligibility requirements

forms of ownership

sole proprietorship, partnership, corporation

partnership

two or more people legally agree to become co owners of a business