MGMT 111
Franchise
A business established or operated under an authorization to sell or distribute a company's goods or services in a particular area
Disadvantages of an LLC
Self employment taxes and more paperwork
Which is the easiest form of business to start up? Sole proprietorship, corporation, s corporation or Public corporation
Sole proprietorship
Partnership
a business owned by two or more people
conglomerate merger
a combination of two firms that are in unrelated industries
double taxation
a corporation pays income taxes on its earnings, and when dividends are distributed to stockholders, the stockholders pay taxes a second time on the corporate dividends they receive-they have to pay taxes twice
Disadvantage of franchise
1. Large start-up costs 2. Shared profit 3. Management regulation 4. Coattail effects 5. Restrictions on selling 6. Fraudulent franchisors
Advantages of home based franchises
1. Relief from commuting stress 2. Low overhead costs
Why are franchises good for minority owners
1. Some offer financial support 2. Provide personal ownership
Franchise owner coattail effect
A fellow franchise owner does something that has an impact on growth and profitability
limited liability
A form of business ownership in which the owners are liable only up to the amount of their individual investments.
Advantages of Sole Proprietorship
Ease of start-up and closure Pride of ownership Retention of all profits No special taxes Flexibility of being your own boss
How are LLCs taxed?
Either as a partnership or as a corporation. They can choose
Technology to help franchises
Gathering leads on website, keeping up to date on emails and chat rooms
3 types of partnership
General, limited and master limited
Limited life span
If the sole proprietor dies, is incapacitated, or retires, the business no longer exists (unless it is sold or taken over by the sole proprietor's heirs).
Why are start up costs high for incorporation
Lawyers and accountants are needed to do these kinds of filings
What is an LLC (Limited Liability Company)?
Limited liability company: protects its owners from personal responsibility for its debts or liabilities. It's very similar to an S corporation
When there is one or more general partners and one or more limited partners
Limited partnership
Disadvantages of sole proprietorship
Limited to life of owner Equity capital limited to owner's personal wealth Unlimited liability Difficult to sell ownership interest
advantages of a franchise
Management and marketing assistance Personal ownership Nationally recognized name Financial advice and assistance Lower failure rate
example of franchise
McDonald's
How is distribution of profits and losses distributed in an LLC
Members agree on the percentage to be distributed. It's not always equal
Do LLCs have to keep minutes of hold annual meetings
No
acquisition
One company purchases the property and obligations of another
leaving a legacy
Owners can leave a sole proprietorship business to future generations.
Which has a greater chance of succeeding sole proprietorships or partnerships?
Partnerships
Share of profits or sales paid to the franchiser
Royalties
What kind of taxes do LLC owners have to pay (examples are Medicare and social security)
Self employment taxes
unlimited liability in sole proprietorship
The owner is personally and fully responsible for all losses and debts of the business
unlimited liability
The owner is personally and fully responsible for all losses and debts of the business (sole proprietorships have this?
cooperative
When producers, consumers or workers with similar needs pool their resources for mutual gain
Conventional (C) Corporation
a state-charted legal entity with authority to act and have liability separate from its owners
Leveraged Buyout (LBO)
an attempt by employees, management, or a group of investors to purchase an organization primarily through borrowing
Sole Proprietorship
business owned and operated by one person
horizontal merger
combination of two or more firms producing the same kind of product (they are at the same level of business)
limited liability
financial responsibility of business owners only for what they invested in a business
limited partnership
form of partnership where one or more partners are not active in the daily running of the business, and whose liability for the partnership's debt is restricted to the amount invested in the business
advantage of partnership over sole proprietorship
greater financial resources - banks are more likely to lend money - risk is spread out between 2 parties
taking a firm private
management or a group of stockholders decides to maintain or in some cases regain control of all of the stock
General Partnership
partnership in which partners share equally in both responsibility and liability
vertical merger
the combination of two or more firms involved in different stages of related businesses
horizontal merger
the joining of two firms in the same industry
merger
when two or more companies join to form a single firm