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Journal Entry If you could own any business….
What business would you own? Why? Would you own it alone? Would you own it with a partner? Would your partner be a friend? Family member?
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Forms of Business Ownership
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Evaluation Criteria Tax consideration Liability exposure
Start-up and future capital requirement Control Managerial ability Business goals Management succession plans Cost of formation
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Sole Proprietorship A business owned and managed by one individual; the business and the owner are one and the same in the eyes of the law
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Sole Proprietorship Advantages Simple to create Least costly form
Profit incentive Total decision-making No special legal restrictions Easy to discontinue
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Sole Proprietorship Disadvantages Unlimited personal liability
Limited skills and abilities Feelings of isolation Limited access to capital
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Partnership An association of two or more people who co- own a business for the purpose of making a profit
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Partnership Advantages Easy to establish Complementary skills
Division of profits Larger pool of capital Ability to attract limited partners Little governmental regulation Flexibility
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Partnership Disadvantages Unlimited liability of at least one
Difficulty in disposing of interest Lack of continuity Potential for personality and authority conflicts Partners bound by law of agency
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Corporations A business that is owned by stockholders and that has legal rights and responsibilities as if it were a person.
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Corporations Advantages Limited liability of stockholders
Ability to attract capital Ability to continue indefinitely Transferable ownership
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Corporations Disadvantages Cost and time in incorporating
Double taxation Legal requirements and red tape Potential loss of control
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Franchise Is the right or license to sell a company’s product or service at a designated location Involves: franchisor: a business which leases its trade name and operating system to another person franchisee: person or persons who pay fees to a company to operate a business under the franchisor’s trade name
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Advantages Include: assistance from parent company name recognition
parent company shares experiences and proven techniques name recognition McDonalds® Sherwin Williams® shared advertising expenses
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Disadvantages Include: high purchase fees
percentage of sales or yearly fee paid to parent company must follow parent company business structure
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Partner activity! Client 1: Elise MacMillan and her brother Evan co-founded The Chocolate Farm in Englewood, Colorado, in the late 1990s. Client 2: Milton Hershey broke ground for his chocolate factory near Lancaster, PA in It was the beginning of what would become Hershey Foods Corporation . Client 3: Forest Mars invited Bruce Murrie, an investment banker and son of the Hershey company president, to be his partner in M&M Ltd. The M&Ms we still eat today were first sold to the public in The letters in "M&M" stand for Mars & Murrie. Eventually, Murrie left the business but Forest Mars became the owner of Mars, Inc. Client 4: Wally Amos launched the Famous Amos Cookie Company in a Hollywood, CA storefront on Sunset Boulevard in 1975.
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Answer the following Questions:
What has happened to the founder of the business? Is he or she still involved with the company? What other things has he or she done? Who owns the business? How has the business changed? Has the company been involved in any mergers or acquisitions? What products does the company sell? What made this company so successful?
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