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Ch. 4 Type Of Ownership


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Ch. 4 Type Of Ownership

  1. 1. Chapter 4 –Selecting a Type of Ownership Business Ownership Spring 2007 Williams C. Greene, (2000). Entrepreneurship Ideas in Action. Cincinnati, OH: South-Western.
  2. 2. Lesson 4.2 Own a Franchise or Start a Business <ul><li>There are several ways of going into business and becoming an entrepreneur. You can: </li></ul><ul><ul><li>Purchase an existing business </li></ul></ul><ul><ul><li>Enter a family business </li></ul></ul><ul><ul><li>Purchase a franchise </li></ul></ul><ul><ul><li>Start your own business </li></ul></ul>
  3. 3. 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. (pg. 75) </li></ul><ul><li>The two parties to a franchise agreement are the franchisor , the parent company of a franchise agreement that provides the produce/service, and the franchisee , the distributor of a franchised product/service </li></ul>
  4. 4. Operating Costs of a Franchise <ul><li>The initial franchise fee is the fee the franchise owner pays in return for the right to run the franchise. </li></ul><ul><li>Start-up costs are the costs associated with beginning a business. </li></ul><ul><li>Royalty fees are weekly/monthly payments made by the owner of franchise. </li></ul><ul><li>Advertising fees are fees paid to support advertising of the franchise as a whole. </li></ul><ul><li>(pg. 75-76) </li></ul>
  5. 5. Starting Your Own Business <ul><li>For whatever reason, running an existing business or operating a franchise may not be right for you. This means to be an entrepreneur you will have to establish a business of your own. </li></ul>
  6. 6. Advantages of Starting Your Own Business <ul><li>Independence </li></ul><ul><li>Satisfaction </li></ul><ul><li>Challenge of creating something new </li></ul><ul><li>Triumph when business is profitable </li></ul><ul><li>(pg. 79) </li></ul>
  7. 7. Disadvantages of Starting Your Own Business <ul><li>RISKS </li></ul><ul><li>Uncertainty of demand for the product/service </li></ul><ul><li>Need to make decisions daily </li></ul><ul><li>(pg. 80) </li></ul>
  8. 8. Lesson 4.3-Choose the Legal Form of Your Business <ul><li>Once you decide to start your own business, you must decide what type of ownership the business will have. </li></ul><ul><li>There are three types of ownership arrangements to choose from: </li></ul><ul><ul><li>Sole Proprietorship </li></ul></ul><ul><ul><li>Partnership </li></ul></ul><ul><ul><li>Corporation </li></ul></ul>
  9. 9. Types of Business Arrangements <ul><li>A business that is owned exclusively by one person is a sole proprietorship . </li></ul><ul><li>A business owned by two or more people is a partnership . </li></ul><ul><li>A business with the legal rights of a person and which may be owned by many people is a corporation . </li></ul><ul><li>(pg. 82) </li></ul>
  10. 10. Sole Proprietorship <ul><li>Sole proprietorships enable a person to be in control of all business aspects with little government control. </li></ul><ul><li>A sole proprietor may find it difficult to raise money and encounter greater loss of private assets. </li></ul><ul><li>(pg. 82) </li></ul>
  11. 11. Partnership <ul><li>Advantages: </li></ul><ul><ul><li>Shared decision making </li></ul></ul><ul><ul><li>Losses shared by all partners </li></ul></ul><ul><ul><li>Little government regulation </li></ul></ul><ul><li>Disadvantages: </li></ul><ul><ul><li>Partners may not like shared profits </li></ul></ul><ul><ul><li>DISAGREEMENTS </li></ul></ul><ul><li>Partnership Agreement: </li></ul><ul><li>When two or more entrepreneurs go into business together, they generally sign a partnership agreement . This agreement is to set down in writing the rights and responsibilities of each of the owners. </li></ul><ul><li>(pg. 83) </li></ul>
  12. 12. Corporation <ul><li>Unlike a sole proprietorship or a partnership, a corporation is treated independently of its owners. </li></ul><ul><li>Since a corporation has the legal rights of a person, the corporation, not the owners, pays taxes, enters into contracts, and may be held liable for negligence. </li></ul>
  13. 13. Team Activity <ul><li>Find a business either local, nation-wide, or world wide that represents each of the three business arrangements. </li></ul>