BUSINESS STRUCTURES

Types of Business Structures Sole Proprietor Partnership  General Partnership  Limited Partnership  Limited Liability Partnership Corporations Others (Franchises, Co-ops, Nonprofits)

ADVANTAGES OF BEING A SOLE PROPRIETOR

EASY START UP  FEW GOV’T. REGULATIONS AND BARRIERS TO ENTRY

GETS ALL THE PROFIT It is by FAR the most popular type of firm.

FULL CONTROL AND DECISION MAKING

EASY TO DISCONTINUE

DISADVATAGES OF BEING A SOLE PROPRIETOR

UNLIMITED PERSONAL LIABILITY (business and personal assets can be taken to pay debt)

LACK OF PERMANENCE  IF THE OWNER DIES, THE BUSINESS COULD DIE TOO.

LIMITED RESOURCES  ONE PERSON, ONE SOURCE OF CAPITAL (money)

RESPONSIBILITY AND TIME COMMITMENT RESTS ON ONE PERSON

THREE TYPES OF PARTNERSHIPS

General Partnership:  All partners are financially responsible for debt and liability.  All may be sued professionally and personally

Limited Partnership:  One partner has unlimited liability and can be sued professionally and personally  Other partners have limited liability and can only lose professional assets  Partners, however, are not equal in sharing profits

Limited Liability Partnership:  All partners have limited liability and none can be sued for personal assets…only professional  These forms of partnerships need government approval  Ex: Medical offices and law firms

ADVANTAGES OF PARTNERSHIPS

EASY START UP  FEW GOV’T. REGULATIONS AND BARRIERS TO ENTRY

SHARED DECISION MAKING AND SPECIALIZATION

LARGER POOL FOR FUNDING

NO SPECIAL TAXES

DISADVANTAGES OF PARTNERSHIPS

UNLIMITED LIABILITY

Limited Liability Partnership:  All partners have limited liability and none can be sued for personal assets…only professional  These forms of partnerships need government approval  Ex: Medical offices and law firms

PERSONAL CONFLICT

ADVANTAGES OF CORPORATIONS

LIMITED PERSONAL LIABILITY FOR STOCKHOLDERS (personal assets cannot be taken away)

OWNERSHIP IS TRANSFERABLE (you may sell it when you want)

THE COMPANY CAN ATTRACT CAPITAL QUICKLY BY SELLING STOCK

LONG LIFE (Corporations can live forever, beyond life of founder)

DISADVANTAGES OF CORPORATIONS

DIFFICULT AND EXPENSIVE TO START-UP

DOUBLE TAXATION (corporate and dividend)

LOSS OF CONTROL FOR FOUNDER

A LOT OF GOV’T. REGULATIONS

CORPORATE COMBINATIONS

HORIZONTAL MERGER  COMPANIES FROM SAME INDUSTRY JOIN TOGETHER MERGERS

VERTICAL MERGER  Combination of two or more firms involved in different stages of producing the same good or service

CONGLOMERATE Business combination of more than 3 businesses that make unrelated products

MULTINATIONAL CORPORATION THAT OPERATES IN MORE THAN ONE COUNTRY _________________________

Other Types of Organizations Cooperative (Co-op): Business organization owned and operated by a group for their benefit. Non-profit: Usually in the business of benefiting society.

FRANCHISE CORPORATION THAT SELLS ITS NAME FOR A FEE TO INDEPENDENT OWNERS What do you normally think of?

PROS OF FRANCHISE CORP. BUILT IN REPUTATION MANAGMENT AND TRAINING SUPPORT

…MORE PROS STANDARDIZED QUALITY THAT PEOPLE TRUST NATIONAL ADVERTISING

…EVEN MORE PROS FINANCIAL ASSISTANCE FROM MOTHER CORP. CORP. BUYS IN BULK SAVING MONEY FOR FRANCHISE OWNER

CONS OF FRANCHISES HIGH FEE AND ROYALTY PAYMENTS STRICT STANDARDS OF OPERATION

…MORE CONS PURCHASING RESTRICTIONS (you must buy from mother corp.) LIMITED PRODUCT LINE (can’t develop own goods)

Dunkin' Donuts Cost of Franchise: $40,000 to $80,000 Average total start up costs vary depending on location. KFC Cost of Franchise: $45,000 Average total start up costs: From 1 to 3 million US$. Further details on KFC Franchise Opportunity USA McDonald's Franchise USA Cost of Franchise $45,000 Average running costs $950,000 to $1,800,000 Massage Envy Cost of Franchise $39,000 Average Start up costs $290,000 to $470,000 Pizza Hut Cost of Franchise: $25,000 Average total start up costs: From 210 thousand to 3 million US$, depending on location and size of store. Snap-On Tools Cost of Franchise: From $5,000 to $15,000 Average total start up costs: From $17,000 to $280,000 Subway Cost of Franchise: $15,000 Average total start up costs: From 80 to 240 thousand US$, depending on location. Supercuts Cost of Franchise: $22,500 Average total start up costs: From 110 to 240 thousand us$