BUS110 Chap 5 - How to Form a Business

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How to Form a Business

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  • See Learning Goal 1: Compare the advantages and disadvantages of sole proprietorships.
  • See Learning Goal 1: Compare the advantages and disadvantages of sole proprietorships. Although corporations make up only 20 percent of the total number of businesses, they make 81 percent of the total receipts. Sole proprietorships are the most common form (72 percent), but they earn only 6 percent of the receipts.
  • See Learning Goal 1: Compare the advantages and disadvantages of sole proprietorships. This slide helps students understand why sole proprietorships account for the largest number of businesses in the United States.
  • See Learning Goal 2: Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. 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.
  • See Learning Goal 2: Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. 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.
  • See Learning Goal 2: Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. 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.
  • See Learning Goal 2: Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. Partnerships have some distinct advantages. The key advantage is that partnerships have access to more resources such as financial, management and knowledge.
  • See Learning Goal 2: Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. Successful partnerships start with a shared vision. In order to develop a successful partnership all partners must be honest with each other and bring a variety of different skills to the partnership. Suggestions to discuss with students regarding partnerships: Partnership agreements must be in writing! Each individual’s responsibilities to the company must be in writing and included as part of the contract. Make certain that provisions are in place if one or more partners want to terminate the agreement. (Information outlining the terms and conditions of terminating any agreement, should be outlined in the original contract.)
  • See Learning Goal 3: Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies.
  • See Learning Goal 3: Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Identify that the major advantage of corporate ownership is the limited liability protection (personal assets are protected). Interesting facts regarding incorporating a business: the cost for a business to Incorporate ranges from about $50 to over $300, plus states fees. Over half of Fortune 500 companies choose to incorporate in Delaware because the state’s laws makes the process easier than it is in other states.
  • See Learning Goal 3: Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies.
  • See Learning Goal 3: Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. World’s Largest Corporations This slide presents Fortune’s 2008 top 10 U.S. corporations. Ask the students: Several of the companies in the top ten deal with similar products/services. How are the products/services these companies sell similar? (Exxon Mobil, Chevron, ConocoPhillips are all oil majors and Valero Energy is a processor of oil.)
  • See Learning Goal 3: Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Largest Private Companies This slide presents America’s top 10 private companies in 2008. The list has changed recently with the Cerberus Capital purchase of Chrysler from Daimler and their purchase of GMAC Financial Services from General Motors. Ask the students to debate why a company may want to remain private? (Some of the reasons may be control, privacy, no external pressure, and preference.)
  • See Learning Goal 3: Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies.
  • See Learning Goal 3: Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. An S corporation looks like a corporation but is taxed like a sole proprietorship or partnership. The primary advantage of an S corporation is that it avoids the double taxation of a C corporation. Approximately 3 million US companies operate as an S corporation.
  • See Learning Goal 3: Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Originally to qualify as an S Corporation the number of shareholders was limited to 75; this has now been amended to no more than 100.
  • See Learning Goal 3: Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Advantages and disadvantages of LLCs are listed in this slide. The biggest advantages that should be pointed out with LLCs are limited liability and flexibility.
  • See Learning Goal 4: Describe three types of corporate mergers, and explain the role of leveraged buyouts and taking a firm private.
  • See Learning Goal 4: Describe three types of corporate mergers, and explain the role of leveraged buyouts and taking a firm private. There are three types of mergers. Horizontal mergers take place in the same industry, i.e., one competitor merging with another. An example of this would be Daimler Mercedes Benz merging with Chrysler to create DaimlerChrysler in the 1990s. Vertical merger takes place between companies in a value chain, for example a supplier and a distributor merging. Conglomerate merger has no relationship between companies, both Tyco and General Electric operate as conglomerates.
  • See Learning Goal 4: Describe three types of corporate mergers, and explain the role of leveraged buyouts and taking a firm private.
  • See Learning Goal 5: Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising.
  • See Learning Goal 5: Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. Franchising has a lower failure rate because the franchisee has support from the franchisor. This support can range from marketing to financial.
  • See Learning Goal 5: Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising.
  • See Learning Goal 5: Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. What to Choose? This is valuable information that must be examined by anyone wishing to purchase a franchise. The number-one reason why franchises fail is due to miscalculation of start-up costs and operating costs. Examine all costs carefully. It is important to understand that all franchise opportunities are not created equal. Suggest to the class that anyone interested in a franchise should also follow these additional guidelines: Have an attorney experienced in franchise contracts review the agreement. Hire a CPA to review all financial statements. This is commonly referred to as performing a “Due Diligence.” Interview other franchise owners. Have experience in the industry.
  • See Learning Goal 5: Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. High Flyers This slide lists ten high-performing franchises. As mentioned earlier not all franchises are created equal and require careful investigation before considering an investment. Web sites like www.franchise.com provide information such as the cost of thousands of franchise systems. Ask students: What makes an effective franchisor? ( Answers will vary but should include name recognition, financial stability, innovative product and effective business management.)
  • See Learning Goal 6: Explain the role of cooperatives.
  • See Learning Goal 2: Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. There are two less common forms of partnerships outlined in this slide: master limited partnership and the limited liability partnership. The master limited partnership is unique because it combines the tax benefits of a more traditional partnership and the liquidity of a publicly traded security. One example of a master limited partnership is Kinder Morgan Energy Partners which is engaged in energy storage and operates 26,000 miles of pipelines.
  • See Learning Goal 3: Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. America’s Oldest Companies Interesting slide that identifies those companies that have been in business for over 200 years. A few facts you may wish to address with the students: JE Rhoads & Sons is the oldest company in the U.S. and started off tanning leather for Buggy Whips. Philadelphia Contributorship Insurance was formed based on a suggestion by Benjamin Franklin regarding the establishment of a volunteer fire brigade, which eventually developed into an insurance company. The Bank of New York, New York’s first bank, was opened for business in Lower Manhattan on June 9th, 1784, only a few months after the departure of British Troops from American soil. (Bank of New York merged with Mellon Financial Corporation of Pittsburgh and was renamed Bank of New York Mellon in 2007. Environmental changes in the business world will always happen; those companies that embrace change and provide quality goods and services, will continue to profit. Discuss with the students the significant amount of commitment a company must be prepared to do to stay in business. ( Some areas that must continually be addressed are changes in societal culture, competition, economy, laws/politics, and technology changes.)
  • See Learning Goal 3: Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies.
  • See Learning Goal 5: Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising.
  • See Learning Goal 5: Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. Benefits of a Home-Based Franchise Home-based businesses are growing at an enormous rate. This slide helps clarify some of the reasons why. Share with the class some tips on getting started: Decide on business idea Set goals for the business How many hours do you want to work? How many employees do you want? How much money will you need to get started? Visit www.e-myth.com for more online information regarding startups.
  • See Learning Goal 5: Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising.
  • The primary advantages of sole proprietors are: Ease of starting and ending the business, being your own boss, pride of ownership. leaving a legacy, retention of company profits, no special taxes. Disadvantages include: Unlimited liability, limited financial resources, management difficulties, overwhelming time commitment, few fringe benefits, limited growth, limited life span. 2) With unlimited liability, the sole proprietor is liable for all debts and obligations of the business and must pay them even if it means selling your home, car, or whatever else you own.
  • 1) Before buying a franchise be sure to check a company’s (franchisor’s) resources and reputation. Scams are all over franchising. The checklist on page 134 gives extended advice of factors to consider before buying a franchise. 2) Successful franchising in global markets offers the same opportunities as in domestic markets. However, franchisors must be careful to adapt to the region where they wish to expand. McDonalds’ for example has more than 31,000 restaurants in 119 countries. 3) A cooperative is 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.
  • 1) 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. 2) Some of the advantages of partnerships are: More financial resources, shared management and pooled/complimentary 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.
  • Advantages of 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. 2) 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. 3) 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. 4) 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.
  • BUS110 Chap 5 - How to Form a Business

    1. 1. * * Chapter Five How to Form a Business Copyright © 2010 by the McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin
    2. 2. BRIAN SCUDAMORE 1-800-GOT-JUNK? * * <ul><li>Bought a used truck and started Rubbish Boys, later changed the name to 1-800-GOT-JUNK? . </li></ul><ul><li>$130 million in annual earnings from locations across North America and Australia. </li></ul><ul><li>Expanded through franchising. </li></ul>Profile 5-
    3. 3. MAJOR FORMS of OWNERSHIP * * Basic Forms of Business Ownership <ul><ul><li>Sole Proprietorship – </li></ul></ul><ul><ul><ul><li>Business owned, and usually managed, by one person. </li></ul></ul></ul><ul><ul><li>Partnership – </li></ul></ul><ul><ul><ul><li>Two or more people legally agree to become co-owners of a business. </li></ul></ul></ul><ul><ul><li>Corporation – </li></ul></ul><ul><ul><ul><li>Legal entity with authority to act and have liability apart from its owners. </li></ul></ul></ul>LG1 5-
    4. 4. FORMS of BUSINESS OWNERSHIP * * Basic Forms of Business Ownership LG1 5-
    5. 5. SOLE PROPRIETORSHIPS * * Advantages of Sole Proprietorships LG1 5- Advantages Disadvantages Ease of start/end Be your own boss Pride of ownership Leave a legacy Retain profit No special taxes <ul><li>Unlimited liability </li></ul><ul><li>Limited financial resources </li></ul><ul><li>Management difficulty </li></ul><ul><li>Time commitment </li></ul><ul><li>Few fringe benefits </li></ul><ul><li>Limited growth </li></ul><ul><li>Limited life span </li></ul>
    6. 6. MAJOR TYPES of PARTNERSHIPS * * Partnerships <ul><ul><li>General Partnership – </li></ul></ul><ul><ul><ul><li>All owners share in operating the business and in assuming liability for the business’s debts. </li></ul></ul></ul><ul><ul><li>Limited Partnership – </li></ul></ul><ul><ul><ul><li>A partnership with one or more general partners and one or more limited partners. </li></ul></ul></ul>LG2 5-
    7. 7. TYPES OF PARTNERS * * Partnerships <ul><ul><li>General Partner – </li></ul></ul><ul><ul><ul><li>Unlimited liability and is active in managing the firm. </li></ul></ul></ul><ul><ul><li>Limited Partner – </li></ul></ul><ul><ul><ul><li>Invests money in the business but enjoys limited liability . </li></ul></ul></ul><ul><ul><ul><ul><li>liability for debts is limited to amount limited partner puts into company; personal assets not at risk. </li></ul></ul></ul></ul>LG2 5-
    8. 8. TYPES of PARTNERSHIPS * * Partnerships LG2 5- General Limited GP GP GP GP GP Passive Investor Passive Investor Passive Investor
    9. 9. PARTNERSHIPS * * Advantages & Disadvantages of Partnerships LG2 5- Advantages Disadvantages <ul><li>More financial </li></ul><ul><li>resources </li></ul><ul><li>Shared </li></ul><ul><li>management </li></ul><ul><li>Longer survival </li></ul><ul><li>No Special Taxes </li></ul><ul><li>Unlimited liability </li></ul><ul><li>Division of profits </li></ul><ul><li>Disagreements </li></ul><ul><li>among partners </li></ul><ul><li>Difficult to </li></ul><ul><li>terminate </li></ul>
    10. 10. PICK YOUR PARTNER WISELY (Spotlight on Small Business) * * There is no such thing as a perfect partner but ask these questions when you try to find your best match: <ul><li>Do you share the same goals? </li></ul><ul><li>Do you share the same vision for the company? </li></ul><ul><li>What skills does he/she have? Are yours the same? </li></ul><ul><li>What can he/she bring to the business? </li></ul><ul><li>What type of decision maker is he/she? </li></ul><ul><li>Do you trust each other? </li></ul><ul><li>How does he/she problem solve? </li></ul>5-
    11. 11. CONVENTIONAL CORPORATIONS * * Corporations <ul><ul><li>Conventional (C) Corporation – </li></ul></ul><ul><ul><ul><li>State-chartered legal entity </li></ul></ul></ul><ul><ul><ul><li>Authority to act and have liability separate from owners (stockholders). </li></ul></ul></ul>LG3 5-
    12. 12. CORPORATIONS * * Advantages of Corporations LG3 5- Advantages Disadvantages <ul><li>Limited liability </li></ul><ul><li>More money for </li></ul><ul><li>investment </li></ul><ul><li>Size </li></ul><ul><li>Perpetual life </li></ul><ul><li>Ease of ownership </li></ul><ul><li>change </li></ul><ul><li>Ease of drawing </li></ul><ul><li>talented employees </li></ul><ul><li>Separation of </li></ul><ul><li>ownership/mgmt. </li></ul><ul><li>Extensive paperwork </li></ul><ul><li>Double taxation </li></ul><ul><li>Two tax returns </li></ul><ul><li>Size </li></ul><ul><li>Termination difficult </li></ul><ul><li>Conflict with </li></ul><ul><li>Stockholder & Board </li></ul><ul><li>Initial cost </li></ul>
    13. 13. HOW OWNERS AFFECT MANAGEMENT * * Advantages of Corporations LG3 5-
    14. 14. The BIG BOYS of BUSINESS America’s Largest Corporations * * Source: Fortune, www.fortune.com , April 2009. <ul><li>Exxon Mobil </li></ul><ul><li>Wal-Mart </li></ul><ul><li>Chevron </li></ul><ul><li>ConocoPhillips </li></ul><ul><li>General Electric </li></ul>Advantages of Corporations LG3 <ul><li>General Motors </li></ul><ul><li>Ford </li></ul><ul><li>AT&T </li></ul><ul><li>Hewlett-Packard </li></ul><ul><li>Valero Energy </li></ul>5-
    15. 15. PRIVACY PLEASE The Ten Largest Private Corporations in the U.S. * * Source: Forbes, www.forbes.com , November 2008. Advantages of Corporations LG3 5- Company State Industry Cargill MN Farming Koch Industries KS Chemicals Chrysler MI Automobiles GMAC Financial Services MI Financial PricewaterhouseCoopers NY Business Services Mars VA Food Bechtel CA Construction HCA TN Hospitals Ernst & Young NY Business Services Publix Supermarkets FL Grocery
    16. 16. WHO CAN INCORPORATE? * * Individuals Can Incorporate <ul><ul><ul><li>Anyone - truckers, doctors, plumbers, athletes and small business owners can incorporate. </li></ul></ul></ul><ul><ul><ul><li>Normally, stock is not issued when individuals incorporate so the advantages and disadvantages are not exactly the same as for large corporations. </li></ul></ul></ul><ul><ul><ul><li>Major advantages are limited liability and possible tax benefits . </li></ul></ul></ul>LG3 5-
    17. 17. S CORPORATIONS * * S Corporations <ul><ul><li>S Corporation – </li></ul></ul><ul><ul><ul><li>Unique government creation </li></ul></ul></ul><ul><ul><ul><li>looks like a corporation </li></ul></ul></ul><ul><ul><ul><li>taxed like sole proprietorships and partnerships. </li></ul></ul></ul><ul><ul><ul><li>S corporations have shareholders, directors and employees, plus the benefit of limited liability. </li></ul></ul></ul><ul><ul><ul><li>Profits are taxed only as the personal income of the shareholder. </li></ul></ul></ul>LG3 5-
    18. 18. WHO CAN FORM S CORPORATIONS? * * S Corporations <ul><ul><li>Qualifications for S Corporations: </li></ul></ul><ul><ul><ul><li>No more than 100 shareholders. </li></ul></ul></ul><ul><ul><ul><li>Shareholders are individuals or estates and are citizens or permanent residents of the U.S. </li></ul></ul></ul><ul><ul><ul><li>Only one class of stock. </li></ul></ul></ul><ul><ul><ul><li>Derive no more than 25% of income from passive sources. </li></ul></ul></ul><ul><ul><ul><li>If an S corporation loses its S status, it may not operate under it again for at least 5 years. </li></ul></ul></ul>LG3 5-
    19. 19. LIMITED LIABILITY COMPANIES * * Limited Liability Companies LG3 5- Advantages Disadvantages Limited Liability Tax Choice Flexible Ownership Rules Flexible Profit & Loss Distribution Operating Flexibility <ul><li>No Stock </li></ul><ul><li>Limited Life Span </li></ul><ul><li>Fewer Incentives </li></ul><ul><li>Taxes </li></ul><ul><li>Paperwork </li></ul>
    20. 20. MERGERS and AQUISITIONS * * Corporate Expansion: Mergers and Acquisitions <ul><ul><ul><li>Merger -- The result of two firms joining to form one company. </li></ul></ul></ul><ul><ul><ul><ul><li>Acquisition -- One company’s purchase of the property and obligations of another company. </li></ul></ul></ul></ul>LG4 5-
    21. 21. TYPES of MERGERS * * Corporate Expansion: Mergers and Acquisitions LG4 5- Conglomerate – completely unrelated industries Vertical – different stages of related business. Horizontal – same stage of same industry No Relationship between companies
    22. 22. LEVERAGED BUYOUTS * * Corporate Expansion: Mergers and Acquisitions <ul><ul><ul><li>Leveraged Buyout (LBO) – </li></ul></ul></ul><ul><ul><ul><ul><li>An attempt by employees, management or a group of investors to buy out the stockholders in a company. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Range in size from $50 million to $31 billion and from small businesses to giant corporations. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>In 2007, foreign investors poured $414 billion into U.S. companies. </li></ul></ul></ul></ul>LG4 5-
    23. 23. FRANCHISING * * Franchises <ul><ul><ul><li>Franchise Agreement – </li></ul></ul></ul><ul><ul><ul><ul><li>An arrangement whereby someone with a good idea for a business ( franchisor ) sells the rights to use the business name and sell a product or service ( franchise ) to others ( franchisees ) in a given territory. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>More than 900,000 franchised businesses operate in the U.S., employing approximately 10 million people. </li></ul></ul></ul></ul>LG5 5-
    24. 24. FRANCHISING * * Advantages & Disadvantages of Franchises LG5 5- Advantages Disadvantages Management & marketing assistance Personal ownership Recognized name Financial advice & assistance Lower failure rate High start-up costs Shared Profit Management regulation Coattail effects Restrictions on selling Fraudulent franchisors
    25. 25. GLOBAL FRANCHISING * * Franchising in International Markets <ul><ul><ul><ul><li>Canada is the most popular target for U.S. based franchises; South Africa and the Philippines are becoming popular despite high cost. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Franchising is successful when the product is convenient, high quality, great service is included and the franchisee adapts to the region. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>International franchising goes both ways – some foreign franchises have come to the U.S. </li></ul></ul></ul></ul>LG5 5-
    26. 26. WHAT to CHOOSE? Picking Franchises that May Survive a Recession * * Source: Richard Gibson, Wall Street Journal, www.wsj.com , February 12, 2008. <ul><li>Focus on tried-and-true name brands. </li></ul><ul><li>Stick to core goods and services. </li></ul><ul><li>Be choosy about the site. </li></ul><ul><li>Don’t pinch pennies. </li></ul><ul><li>Have a fallback choice. </li></ul><ul><li>Don’t assume the franchise will pay off . </li></ul>Franchising in International Markets LG5 5-
    27. 27. HIGH FLYERS Ten High-Performing Franchises * * Source: Wall Street Journal, www.wsj.com , February 12, 2008. <ul><li>Arthur Murray Dance Studios </li></ul><ul><li>Banfield Pet Hospitals </li></ul><ul><li>Bojangles’ Famous Chicken ‘n Biscuits </li></ul><ul><li>Denny’s </li></ul><ul><li>Friendly’s </li></ul><ul><li>The Melting Pot </li></ul><ul><li>Nathan’s Famous </li></ul><ul><li>Servpro </li></ul><ul><li>Stanley Steamer </li></ul><ul><li>Two Men and a Truck </li></ul>Franchising in International Markets LG5 5-
    28. 28. COOPERATIVES * * Cooperatives <ul><ul><ul><ul><li>Cooperatives -- Businesses owned and controlled by the people who use it – producers, consumers, or workers with similar needs who pool their resources for mutual gain. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Worldwide, 750,000 cooperatives serve 730 million members – 120 million in the U.S. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Members democratically control the business by electing a board of directors that hires professional management. </li></ul></ul></ul></ul>LG6 5-
    29. 29. Review Only
    30. 30. OTHER FORMS of PARTNERSHIPS * * Partnerships <ul><ul><li>Master Limited Partnership -- A partnership that looks much like a corporation but is taxed like a partnership and thus avoids the corporate income tax. </li></ul></ul><ul><ul><li>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 supervision. </li></ul></ul>LG2 5-
    31. 31. OLDIES BUT GOODIES America’s Oldest Corporations * * Individuals Can Incorporate LG3 5- Company Year Started Type of Company J.E. Rhoads & Sons 1702 Conveyer Belts Covenant Life Insurance 1717 Insurance Philadelphia Insurance 1752 Insurance Contributorship Dexter 1767 Adhesives & Coatings D. Landreth Seed 1784 Seeds Bank of New York 1784 Banking
    32. 32. VERMONT WANTS to be the HOME of YOUR NEW VIRTUAL COMPANY (Legal Briefcase) * * <ul><li>Since June 2008, Vermont allows a new kind of LLC that exist only online. </li></ul><ul><li>Registration documents can be filed online, meetings can be held through online communication, and relationships can be established electronically. </li></ul><ul><li>Virtual companies allow online contributors with different skills, availability and interest to interact and be successful. </li></ul>5-
    33. 33. WOMEN in FRANCHISING * * Diversity in Franchising <ul><ul><ul><ul><li>Women own about half of U.S. companies yet receive less than 4% of venture capital. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>For the past 20 years, firms owned by women have grown at twice the rate of all companies. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>More women are becoming franchisors. Auntie Anne’s , Decorating Den , Jazzercise and Two Men and a Truck are owned by women. </li></ul></ul></ul></ul>LG5 5-
    34. 34. HOME-BASED FRANCHISES * * Home-Based Franchises <ul><ul><ul><ul><li>Advantages: </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Relief from commuting stress </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Extra family time </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Low overhead expenses </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><li>Main Disadvantage: </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Isolation </li></ul></ul></ul></ul></ul>LG5 5-
    35. 35. ROOT, ROOT, ROOT for the GREEN TEAM (Thinking Green) * * <ul><li>The Nationals in D.C. have the first sports stadium to earn the U.S. Green Building Council’s Leadership in Energy and Environmental Design (LEED) Rating. </li></ul><ul><li>95% of the stadium’s steel was recycled and low-flow toilets save millions of gallons of water. </li></ul><ul><li>New stadiums of the Mets and Twins also have earned LEED certifications. </li></ul>5-
    36. 36. PROGRESS ASSESSMENT * * Progress Assessment <ul><ul><li>Most people who start businesses in the United States are sole proprietors. What are the advantages and disadvantages of sole proprietorships? </li></ul></ul><ul><ul><li>Why would unlimited liability be considered a major drawback to sole proprietorships? </li></ul></ul>5-
    37. 37. PROGRESS ASSESSMENT * * Progress Assessment <ul><ul><li>What are some of the factors to consider before buying a franchise? </li></ul></ul><ul><ul><li>What opportunities are available for starting a global franchise? </li></ul></ul><ul><ul><li>What’s a cooperative? </li></ul></ul>5-
    38. 38. PROGRESS ASSESSMENT * * Progress Assessment <ul><ul><li>What’s the difference between a limited partner and a general partner? </li></ul></ul><ul><ul><li>What are some of the advantages and disadvantages of partnerships? </li></ul></ul>5-
    39. 39. PROGRESS ASSESSMENT * * Progress Assessment <ul><ul><li>What are the major advantages and disadvantages of incorporating a business? </li></ul></ul><ul><ul><li>What’s the role of owners (stockholders) in the corporate hierarchy? </li></ul></ul><ul><ul><li>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? </li></ul></ul><ul><ul><li>Why are so many new businesses choosing a limited liability company (LLC) form of ownership? </li></ul></ul>5-

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