1. [ 5.2 ] Partnerships and Franchises

2. [ 5.2 ] Partnerships and Franchises
Learning Objectives
Explain the characteristics of different types of partnerships.
Analyze the advantages of partnerships.
Analyze the disadvantages of partnerships.
Describe how a business franchise operates.

3. [ 5.2 ] Partnerships and Franchises
Key Terms
partnership
general partnership.
limited partnership,
limited liability partnership
articles of partnership,
assets,
business franchise
royalties.

4. The Characteristics of Partnerships
Have you ever thought about setting up your own business? Suppose the idea is very appealing, but you aren’t sure that you want to take on all the responsibilities needed to be successful. You may be great at doing the work, like repairing computers, but you may dread all the paperwork that goes along with being in business. Do you have to give up your dream? Some business owners overcome obstacles that block them from starting a business, whether it is a shortage of money or of specific skills, by taking on a partner who supplies what is lacking.

5. The Characteristics of Partnerships
General Partnership
Limited Partnership
Limited Liability Partnerships

6. The Characteristics of Partnerships
Law partnerships are common, and law practices can have many partners. Analyze Political Cartoons What advantages and disadvantages might having many partners offer a business?

7. The Characteristics of Partnerships
The table shows how the same business loss might be shared by partners in three different partnerships. Synthesize Why does the personal liability of the partners differ in these scenarios?

8. The Characteristics of Partnerships
Compare and Contrast How do limited liability partnerships differ from the other two types of partnerships?

9. Advantages of Partnerships
Partnerships are easy to establish and are subject to few government regulations. They provide entrepreneurs with a number of advantages.

10. Advantages of Partnerships
Ease of Start-Up
Financial Impact
Shared Decision Making

11. Advantages of Partnerships
Setting up articles of partnership with an attorney helps partners define how their business will be managed. The articles of partnership may also clarify how disagreements will be resolved.

12. Advantages of Partnerships
Make Generalizations What generalization can you make about how investment, profits, and liability are shared in general partnerships?

13. Disadvantages of Partnerships
Partnerships also present some disadvantages. Many of the disadvantages of sole proprietorships are present in partnerships. Limited liability partnerships have fewer disadvantages than partnerships with general partners. All partnerships, however, have the potential for conflict.

14. Disadvantages of Partnerships
Unlimited Liability
Potential for Conflict
Lack of Permanence

15. Disadvantages of Partnerships
When a partnership goes out of business, general partners are fully liable for all the business’s debts. The liability of limited partners extends only to their initial investment.

16. Disadvantages of Partnerships
Make Decisions What do the partners in this business gain by taking on a new partner? What do they give up?

17. Disadvantages of Partnerships
Analyze Graphs If the trend suggested by the graph continues, about what percentage of partnerships do you predict would survive by the end of Year 4? Explain.

18. The Franchise Alternative
Sole proprietorships can suffer from a lack of resources or the lack of skills on the part of the owner. Some people solve these problems by forming partnerships. Others choose another form of business—a franchise.

19. The Franchise Alternative
What Is a Franchise?
Advantages of Franchises
Disadvantages of Franchises

20. The Franchise Alternative
Analyze Information Which aspect of franchising might be helpful for a relatively inexperienced entrepreneur?

21. The Franchise Alternative
UPS Stores, which handle mailing, shipping, and business services, are just one example of a franchise.

22. The Franchise Alternative
The chart compares profits when the same revenue is earned by three types of businesses. Analyze Charts Why does the franchise owner have less profit than the sole proprietor?

23. Quiz: The Characteristics of Partnerships
Which of these is an advantage that general partners alone enjoy in a limited partnership?
A. control of business operations
B. limited liability
C. share of investment
D. share of profits

24. Quiz: Advantages of Partnerships
What is an advantage that the general partners who own a partnership have that the owner of a sole proprietorship may not have?
A. no need to follow government regulations
B. better access to capital
C. ease of start-up
D. no need to hire employees

25. Quiz: Disadvantages of Partnerships
Suppose a business is owned by two partners. What skill does each partner need that a sole proprietor would not necessarily need?
A. decision-making ability
B. management expertise
C. ability to collaborate with an equal
D. advertising expertise

26. Quiz: The Franchise Alternative
What is an advantage of being a franchisee?
A. brand recognition
B. control over products sold to customers
C. franchising fees
D. royalty payments