Chapter 8: Business Organizations

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

 General Partnership  Most common type of partnership  Characteristics  Share responsibilities equally  Share profits equally  Share liability equally UNLIMITED, PERSONAL, LIABILITY!

 Limited Partnership  Characteristics  Only one partner runs the business  Only one partner shoulders UNLIMITED, PERSONAL, LIABILITY!

 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”

 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

 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”

 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

 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

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.)

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

 Advantages 1. Training and support from the parent company 2. Standardized quality requirements attract customers 3. Advertising benefits 4. Financial aid from parent company 5. Bulk buying benefits

 Disadvantages 1. Payments to mother company a. Fees to start the business b. A portion of the profits (royalties) 2. Mother company sets strict standards 3. You MUST purchase from mother company or from approved markets 4. Limited to selling only their products

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?