SELECT A TYPE  OF OWNERSHIP 4.1 Run an Existing Business 4.2 Own a Franchise or Start a Business 4.3 Choose the Legal Form...
Lesson 4.1 RUN AN EXISTING BUSINESS <ul><li>Identify the advantages and disadvantages of purchasing an existing business. ...
ADVANTAGES OF BUYING  AN EXISTING BUSINESS <ul><li>The existing business already has customers, suppliers, and procedures....
DISADVANTAGES OF BUYING  AN EXISTING BUSINESS <ul><li>Many businesses are for sale because they are not making a profit. <...
STEPS TO PURCHASE A BUSINESS <ul><li>Write specific objectives about the kind of business you want to buy, and identify bu...
ENTER A FAMILY BUSINESS  <ul><li>Advantages of a family business  </li></ul><ul><li>Disadvantages of a family business </l...
Lesson 4.2 OWN A FRANCHISE  OR START A BUSINESS <ul><li>Evaluate franchise ownership. </li></ul><ul><li>Recognize the adva...
FRANCHISE OWNERSHIP <ul><li>A  franchise  is a legal agreement that gives an individual the right to market a company’s pr...
OPERATING COSTS OF A FRANCHISE <ul><li>Initial franchise fee </li></ul><ul><li>Start-up costs </li></ul><ul><li>Royalty fe...
ADVANTAGES  OF OWNING A FRANCHISE <ul><li>An entrepreneur is provided with an established product or service. </li></ul><u...
DISADVANTAGES  OF OWNING A FRANCHISE <ul><li>Franchises can cost a lot of money and cut down on profits. </li></ul><ul><li...
EVALUATING A FRANCHISE <ul><li>Demand for product or service </li></ul><ul><li>Exclusive territory </li></ul><ul><li>Costs...
STARTING YOUR OWN BUSINESS <ul><li>Advantages of starting your own business </li></ul><ul><li>Disadvantages of starting yo...
Lesson 4.3 CHOOSE THE LEGAL FORM  OF YOUR BUSINESS <ul><li>Evaluate the different legal forms for a business. </li></ul>GO...
TYPES OF BUSINESS ARRANGEMENTS <ul><li>Sole proprietorship </li></ul><ul><li>Partnership </li></ul><ul><li>Corporation </l...
SOLE PROPRIETORSHIP <ul><li>A business that is owned exclusively by one person is a  sole proprietorship . </li></ul><ul><...
PARTNERSHIP <ul><li>Shared decisions </li></ul><ul><li>Shared investment </li></ul><ul><li>Shared risk </li></ul><ul><li>D...
CORPORATION <ul><li>Share of stock </li></ul><ul><li>Board of directors </li></ul><ul><li>Dividends </li></ul><ul><li>Disa...
S CORPORATION <ul><li>An  S corporation  is a corporation organized under subchapter S of the Internal Revenue Code whose ...
CHARACTERISTICS OF  THE LEGAL FORMS OF BUSINESS Simple to start Decisions made by one person Low initial cost Limited liab...
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Chapter 4

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Chapter 4

  1. 1. SELECT A TYPE OF OWNERSHIP 4.1 Run an Existing Business 4.2 Own a Franchise or Start a Business 4.3 Choose the Legal Form of Your Business
  2. 2. Lesson 4.1 RUN AN EXISTING BUSINESS <ul><li>Identify the advantages and disadvantages of purchasing an existing business. </li></ul><ul><li>Explain the steps involved in buying a business. </li></ul><ul><li>Recognize the advantages and disadvantages of joining a family business. </li></ul>GOALS
  3. 3. ADVANTAGES OF BUYING AN EXISTING BUSINESS <ul><li>The existing business already has customers, suppliers, and procedures. </li></ul><ul><li>The seller of a business may train a new owner. </li></ul><ul><li>There are prior records of revenues, expenses, and profits. </li></ul><ul><li>Financial arrangements can be easier. </li></ul>
  4. 4. DISADVANTAGES OF BUYING AN EXISTING BUSINESS <ul><li>Many businesses are for sale because they are not making a profit. </li></ul><ul><li>Serious problems may be inherited. </li></ul><ul><li>Capital is required. </li></ul>
  5. 5. STEPS TO PURCHASE A BUSINESS <ul><li>Write specific objectives about the kind of business you want to buy, and identify businesses for sale that meet your objectives. </li></ul><ul><li>Meet with business sellers or brokers to investigate specific opportunities. </li></ul><ul><li>Visit during business hours to observe the company in action. </li></ul><ul><li>Ask the owner to provide you with a complete financial accounting of operations for at least the past three years. </li></ul><ul><li>Ask for important information in written form. </li></ul><ul><li>Determine how you would finance the business. </li></ul><ul><li>Get expert help to determine a price to offer for the business </li></ul>
  6. 6. ENTER A FAMILY BUSINESS <ul><li>Advantages of a family business </li></ul><ul><li>Disadvantages of a family business </li></ul>
  7. 7. Lesson 4.2 OWN A FRANCHISE OR START A BUSINESS <ul><li>Evaluate franchise ownership. </li></ul><ul><li>Recognize the advantages and disadvantages of starting a new business. </li></ul>GOALS
  8. 8. FRANCHISE OWNERSHIP <ul><li>A franchise is a legal agreement that gives an individual the right to market a company’s products or services in a particular area. </li></ul><ul><li>A franchisee is the person who purchases a franchise agreement. </li></ul><ul><li>A franchisor is the person or company that offers a franchise for purchase. </li></ul>
  9. 9. OPERATING COSTS OF A FRANCHISE <ul><li>Initial franchise fee </li></ul><ul><li>Start-up costs </li></ul><ul><li>Royalty fees </li></ul><ul><li>Advertising fees </li></ul>
  10. 10. ADVANTAGES OF OWNING A FRANCHISE <ul><li>An entrepreneur is provided with an established product or service. </li></ul><ul><li>Franchisors offer management, technical, and other assistance. </li></ul><ul><li>Equipment and supplies can be less expensive. </li></ul><ul><li>A guarantee of consistency attracts customers. </li></ul>
  11. 11. DISADVANTAGES OF OWNING A FRANCHISE <ul><li>Franchises can cost a lot of money and cut down on profits. </li></ul><ul><li>Owners of franchises have less freedom to make decisions than other entrepreneurs. </li></ul><ul><li>Franchisees are dependent on the performance of other franchisees in the chain. </li></ul><ul><li>The franchisor can terminate the franchise agreement. </li></ul>
  12. 12. EVALUATING A FRANCHISE <ul><li>Demand for product or service </li></ul><ul><li>Exclusive territory </li></ul><ul><li>Costs </li></ul><ul><li>Profitability </li></ul><ul><li>Longevity </li></ul><ul><li>Services provided by franchisor </li></ul><ul><li>Loss of independence </li></ul><ul><li>Cancellation </li></ul>
  13. 13. STARTING YOUR OWN BUSINESS <ul><li>Advantages of starting your own business </li></ul><ul><li>Disadvantages of starting your own business </li></ul>
  14. 14. Lesson 4.3 CHOOSE THE LEGAL FORM OF YOUR BUSINESS <ul><li>Evaluate the different legal forms for a business. </li></ul>GOALS
  15. 15. TYPES OF BUSINESS ARRANGEMENTS <ul><li>Sole proprietorship </li></ul><ul><li>Partnership </li></ul><ul><li>Corporation </li></ul><ul><li>S corporation </li></ul>
  16. 16. SOLE PROPRIETORSHIP <ul><li>A business that is owned exclusively by one person is a sole proprietorship . </li></ul><ul><li>Sole proprietorship is the most common form of ownership in the United States. </li></ul><ul><li>Disadvantages </li></ul><ul><ul><li>Investment </li></ul></ul><ul><ul><li>Risk </li></ul></ul>
  17. 17. PARTNERSHIP <ul><li>Shared decisions </li></ul><ul><li>Shared investment </li></ul><ul><li>Shared risk </li></ul><ul><li>Disadvantages </li></ul><ul><li>Partnership agreement </li></ul>
  18. 18. CORPORATION <ul><li>Share of stock </li></ul><ul><li>Board of directors </li></ul><ul><li>Dividends </li></ul><ul><li>Disadvantages </li></ul><ul><li>Why incorporate? </li></ul>
  19. 19. S CORPORATION <ul><li>An S corporation is a corporation organized under subchapter S of the Internal Revenue Code whose income is taxed as a partnership. </li></ul>
  20. 20. CHARACTERISTICS OF THE LEGAL FORMS OF BUSINESS Simple to start Decisions made by one person Low initial cost Limited liability Limited government regulation Ability to raise capital Double taxation of profits Sole Proprietorship Partnership Corporation S Corporation FEATURE
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