Compare Forms of business ownership FN42 Foods II– Enterprise 4.05 Understand future directions Federal & State Resources for Starting a new business Presentations (The logos used in this PowerPoint were copied directly from corporate websites. They have not been altered in any way.)

Kitchen Groups Each group member will complete a (1) page reflections include here your Milemarker 6 questions. Must be typed and placed in the back of your business plan. Today’s assignment, is to read and discuss 4.05 Forms of Business Ownership. Create a thinking map or a flow chart, illustrating the (3) forms of Business ownership. Include: The definition of each form of ownership Include: Advantages & Disadvantages of each form Include: examples of businesses with at least (2) pictures.

Milemarker 6 Questions to reflect on: How did you test your business idea? What did you have to do to prepare to get the idea out in the marketplace? What problems did you encounter in testing your idea? Are there things you would do differently if you had to do it again?

Flow Chart

Three basic forms of business ownership Sole proprietorship Partnership Corporation

Sole proprietorship A business owned and operated by one person. Approximately 76 percent of all businesses in the U.S. are sole proprietorships.

Advantages of sole proprietorships Easy and inexpensive to create. Owner makes all business decisions. Owner receives all profits. Least regulated form of business ownership. Business itself pays no taxes.

Disadvantages of sole proprietorships Owner has unlimited liability for all debts and actions of the business. Unlimited liability: The debts of the business may be paid from the personal assets of the owner. Difficult to raise capital. Sole proprietorship is limited by his/her skills and abilities. The death of the owner automatically dissolves the business.

Partnership A form of business ownership in which two or more people share the assets, liabilities, and profits.

Types of Partnerships General partnership: A partnership in which all partners have unlimited personal liability and take full responsibility for the management of the business. Limited partnership: A partnership in which the partners’ liability is limited to their investment. Joint venture: A partnership in which two companies join to complete a specific project. The partnership ends after a specified period of time. Strategic alliance: A partnership in which two businesses work together for mutual benefit. Stopped here 11-20-14

Advantages of partnerships Shared decision making and management responsibilities. Easier to raise capital than in a sole proprietorship. Few government regulations. Business losses are shared by all partners.

Disadvantages of partnerships Partnerships may lead to disagreements. Some entrepreneurs are not willing to share responsibilities and profits. Some entrepreneurs fear being held legally liable for the error of their partners. Each owner has unlimited liability.

Corporation A business that is chartered by a state and legally operates apart from its owners.

Types of corporations C-corporation: The most common form of corporation. It protects the entrepreneur from being personally sued for the actions and debts of the corporation. Subchapter S corporation: A corporation that is taxed like a sole proprietorship or partnership. Nonprofit corporation: Legal entities that make money for reasons other than the owner’s profit. Limited Liability Company (LLC): A new form of business ownership that provides limited liability and tax advantages.

Advantages of corporations Can raise money by issuing shares of stock. Offers owners limited liability. Limited liability: Owners are liable only up to the amount of their investments. People can easily enter or leave the business by buying or selling their shares of stock. The business can hire experts to professionally manage each aspect of the business.

Disadvantages of corporations Legal assistance is needed to start a corporation. Start-up is costly. Corporations are subject to more government regulations than partnerships or sole proprietorships. A lot of paperwork is involved in running a corporation. Income is taxed twice.

Alternate approaches to starting a business Buy an existing business. Enter a family business. Own a franchise business.

Advantages of buying an existing business Existing businesses already have customers, suppliers, and procedures. Seller of the business may be willing to train the new owner. There are existing financial records. Financial arrangements may be easier.

Disadvantages of buying an existing business Business may be for sale because it is not making a profit. Problems may be inherited with the purchase of an existing business. Many entrepreneurs may not have the capital needed to purchase an existing business.

Advantages to entering a family business There is a certain sense of pride and accomplishment that comes from being part of a family endeavor. A business can remain in the family for generations. Some people enjoy working with relatives. The efforts of running a family business give one the benefit of knowing that their efforts are helping those whom they care about.

Disadvantages to entering a family business Senior management positions are often held by family members who may not be the best qualified. It may be difficult to retain qualified employees who are not members of the family. Family politics may affect decisions regarding the business. It is often difficult to separate business life and private life in family-run businesses. It is often difficult to set policies and procedures and to make decisions.

Own a franchise business Franchise: A legal agreement that gives an individual the right to market a company’s products or services in a particular area. Franchisee: A person who purchases a franchise agreement. Franchisor: The person or company who sells a franchise. Initial franchise fee: The fee the franchise owner pays in return for the right to run the business.

Advantages of purchasing a franchise business An established product or service is being provided. Franchisors often offer management, technical, and other assistance. Equipment and supplies may be less expensive. A guarantee of consistency attracts customers.

Disadvantages of purchasing a franchise business The cost of franchises may be high, which can reduce profits. Franchise owners are limited in the decisions they can make regarding the business. The performance of other franchises impact on the franchisee. The franchise agreement may be terminated by the franchisor.

You may use your notes remain quiet until everyone has finished What are (3) advantages and disadvantages of a sole proprietorship? Name (3) advantages and disadvantages of a Corporation. What are the major advantages of working within a family owned business? What makes it hard working with family? Why would it be an advantage to buying into all ready made business? In order to keep documents safe where is a good place to keep them? What types of documents need to be put in a safe place and why? Why has Bo jangles become such a well known fast food chain? What’s their secret? Bonus 10 points to be use on an upcoming test: Owning your own business could be tough, what are some of the challenges you may face. What are some potential rewards. Use some of the entrepreneur language meaning use some of the vocabulary words and terms that were introduced early in the unit. (3 to 5 sentence complete sentences.

Bonus: Macy just graduated from college and she has always had a passion for baking. She wants to be her own boss. You are Macy’s friend and have decided to give her some advice on becoming an Entrepreneur. As her friend and owner of a upscale restaurant, what type of advice would you give? Minimum of two paragraph (8 sentences). Correct grammar, complete thoughts, complete sentences.