Section 2: Partnerships and franchises Chapter 8: Business Organizations Section 2: Partnerships and franchises

Partnerships A business organization that is Owned by two or more people Responsibilities are split Profits are split

Types of Partnerships General Partnership Most common type of partnership Characteristics Share responsibilities equally Share profits equally Share liability equally UNLIMITED, PERSONAL, LIABILITY!

Types of partnerships Limited Partnership Characteristics Only one partner runs the business Only one partner shoulders UNLIMITED, PERSONAL, LIABILITY!

Types of partnerships Limited partnerships Characteristics Second* partner’s role Contribute money LIMITED liability – can only lose investment Collect share of profits Second partner’s limitations No say in how to run business “Silent Partner”

Types of Partnerships Limited Partnership Partners are not equal One must be the “general” partner Controls the company UNLIMITED PERSONAL LIABILITY Splits the profits Other partner(s) Put up money Shares profits Has NO SAY / NO CONTROL

Types of Partnerships Limited Liability Partnerships Similar to General Partnership Partners are pretty much equal There is LIMITED liability Only company assets are at risk Only partner’s assets are at risk if he or she makes the mistake Only certain types of companies can be “LLPs”

Partnerships Advantages Easy and inexpensive to establish Little government regulation More than one person contributes money and skills Can offer more fringe benefits Shared decision making

Partnerships Disadvantages Potential conflict with partner(s) Unlimited liability (except LLPs) If your partner messes up and the company suffers, you suffer too! Lack of permanence

Partnerships YOUR TURN: 1. Which one of the three forms of partnerships do you think is best? 2. Why is it better than the other two forms? (Give at least TWO good reasons.)

Franchises SEMI-independent business Pays fees to parent company Gets rights to open a store in a certain area

Franchises Advantages Training and support from the parent company Standardized quality requirements attract customers Advertising benefits Financial aid from parent company Bulk buying benefits

Franchises Disadvantages Payments to mother company Fees to start the business A portion of the profits (royalties) Mother company sets strict standards You MUST purchase from mother company or from approved markets Limited to selling only their products

Franchises YOUR TURN: You investigate the idea of opening your own franchise. (Sears Hardware Store?) 1.Which advantage(s) is/are most important to consider? Why? 2.Which disadvantage(s) is/are most important to consider? Why? 3.Do you do it?