BUSINESS ESSENTIALS J.TURNER 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, 2007Excellence 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, 2007Excellence in Business, 3e Ease of establishment Self-satisfaction Privacy Tax advantages Unlimited liability Personal pressure Difficult to get funding Limited life Sole Proprietorship AdvantagesDisadvantages

© Prentice Hall, 2007Excellence in Business, 3eChapter Easy to Establish Tax Advantages Strength in Numbers Diversity of Skills Extended Life Increased Capital Partnership Advantages

© Prentice Hall, 2007Excellence in Business, 3eChapter PARTNERSHIP DISADVANTAGES Unlimited Liability Unlimited Liability Interpersonal Problems Interpersonal Problems Unproductive Partners Unproductive Partners Managing Partner Managing Partner Law Suits Debts

© Prentice Hall, 2007Excellence in Business, 3eChapter CORPORATIONS Enter Into Contracts Buy and Sell Property Sue and Be Sued Face Limited Liability

© Prentice Hall, 2007Excellence in Business, 3eChapter Corporations  Access to capital  Limited liability  Increased liquidity  Unlimited life span  Excess paperwork  Burdensome costs  Double taxation  Disclosure requirements AdvantagesDisadvantages

THE FRANCHISING ALTERNATIVE Product franchise Manufacturing franchise Business-format franchise ©2007 Prentice Hall 6-12

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 Hall 6-13

PROS AND CONS OF FRANCHISING ©2007 Prentice Hall 6-14 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

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