INTRODUCTION TO BUSINESS AND TECHNOLOGY FORMS OF OWNERSHIP

INTRODUCTION TO BUSINESS AND TECHNOLOGY

FORMS OF OWNERSHIP

SMALL BUSINESS

• Independent business with fewer than 500 employees

• 99.9% of ~26 million US businesses• Responsible for 60-80% of all new jobs• Owner = Manager• One or few locations• Small market• Not dominant in field

© Prentice Hall, 2007 Excellence in Business, 3e

SOLE PROPRIETORSHIP

• Owned by one person• Easiest and least expensive• Examples:

• Farms• Retail establishments• Small service businesses• Home based businesses (caterer, consultant, computer

programmers)

© Prentice Hall, 2007 Excellence in Business, 3e

Ease of establishment

Self-satisfaction

Privacy

Tax advantages

Unlimited liability

Personal pressure

Difficult to get funding

Limited life

Sole ProprietorshipSole Proprietorship

Advantages Disadvantages

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 5 - 7

Easy to EstablishEasy to EstablishEasy to EstablishEasy to Establish Tax AdvantagesTax AdvantagesTax AdvantagesTax Advantages

Strength in NumbersStrength in NumbersStrength in NumbersStrength in Numbers Diversity of SkillsDiversity of SkillsDiversity of SkillsDiversity of Skills

Extended LifeExtended LifeExtended LifeExtended LifeIncreased CapitalIncreased CapitalIncreased CapitalIncreased Capital

Partnership AdvantagesPartnership Advantages

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 5 - 8

PARTNERSHIP DISADVANTAGESPARTNERSHIP DISADVANTAGES

UnlimitedLiability

UnlimitedLiability

InterpersonalProblems

InterpersonalProblems

UnproductivePartners

UnproductivePartners

ManagingPartner

ManagingPartnerLaw SuitsLaw SuitsDebtsDebts

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 5 - 9

CORPORATIONSCORPORATIONS

Enter Into ContractsEnter Into Contracts

Buy and Sell PropertyBuy and Sell Property

Sue and Be SuedSue and Be Sued

Face Limited LiabilityFace Limited Liability

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 5 - 10

CorporationsCorporations

Access to capital

Limited liability

Increased liquidity

Unlimited life span

Excess paperwork

Burdensome costs

Double taxation

Disclosure requirements

Advantages Disadvantages

THE FRANCHISING ALTERNATIVE

• Product franchise

• Manufacturing franchise

• Business-format franchise

©2007 Prentice Hall6-12

EVALUATING A FRANCHISE

• Initial franchise

• Periodic royalties

• Trademarks and names

• Advertising and

promotion

• Business location

• Exclusive territory

• Right of first refusal

• Equipment and supplies

• Agreement termination

• Franchise agreement

©2007 Prentice Hall6-13

PROS AND CONS OF FRANCHISING

©2007 Prentice Hall6-14

Advantages

Get a viable business

Name recognition

Network of support

Blueprint for success

Disadvantages

No guarantee of wealth

High monthly royalties

Limited independence

Limited flexibility

THE END!!