1. SELECT A TYPE OF OWNERSHIP
Entrepreneurship
4/20/2017
Chapter 4
SELECT A TYPE OF OWNERSHIP
4.1 Run an Existing Business
4.2 Own a Franchise or Start a Business
4.3 Choose the Legal Form of Your Business
Chapter 4

2. Lesson 4.1 RUN AN EXISTING BUSINESS
Chapter 4
Lesson 4.1 RUN AN EXISTING BUSINESS
GOALS
Identify the advantages and disadvantages of purchasing an existing business.
Explain the steps involved in buying a business.
Recognize the advantages and disadvantages of joining a family business.

3. ADVANTAGES OF BUYING AN EXISTING BUSINESS
Chapter 4
ADVANTAGES OF BUYING AN EXISTING BUSINESS
The existing business already has customers, suppliers, and procedures.
The seller of a business may train a new owner.
There are prior records of revenues, expenses, and profits.
Financial arrangements can be easier.

4. DISADVANTAGES OF BUYING AN EXISTING BUSINESS
Chapter 4
DISADVANTAGES OF BUYING AN EXISTING BUSINESS
Many businesses are for sale because they are not making a profit.
Serious problems may be inherited.
Capital is required.

5. STEPS TO PURCHASE A BUSINESS
Chapter 4
STEPS TO PURCHASE A BUSINESS
Write specific objectives about the kind of business you want to buy, and identify businesses for sale that meet your objectives.
Meet with business sellers or brokers to investigate specific opportunities.
Visit during business hours to observe the company in action.
Ask the owner to provide you with a complete financial accounting of operations for at least the past three years.
Ask for important information in written form.
Determine how you would finance the business.
Get expert help to determine a price to offer for the business

6. ENTER A FAMILY BUSINESS
Chapter 4
ENTER A FAMILY BUSINESS
Advantages of a family business
Disadvantages of a family business

7. Lesson 4.2 OWN A FRANCHISE OR START A BUSINESS
Chapter 4
Lesson 4.2 OWN A FRANCHISE OR START A BUSINESS
GOALS
Evaluate franchise ownership.
Recognize the advantages and disadvantages of starting a new business.

8. Chapter 4
FRANCHISE OWNERSHIP
A franchise is a legal agreement that gives an individual the right to market a company’s products or services in a particular area.
A franchisee is the person who purchases a franchise agreement.
A franchisor is the person or company that offers a franchise for purchase.

9. OPERATING COSTS OF A FRANCHISE
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OPERATING COSTS OF A FRANCHISE
Initial franchise fee
Start-up costs
Royalty fees
Advertising fees

10. ADVANTAGES OF OWNING A FRANCHISE
Chapter 4
ADVANTAGES OF OWNING A FRANCHISE
An entrepreneur is provided with an established product or service.
Franchisors offer management, technical, and other assistance.
Equipment and supplies can be less expensive.
A guarantee of consistency attracts customers.

11. DISADVANTAGES OF OWNING A FRANCHISE
Chapter 4
DISADVANTAGES OF OWNING A FRANCHISE
Franchises can cost a lot of money and cut down on profits.
Owners of franchises have less freedom to make decisions than other entrepreneurs.
Franchisees are dependent on the performance of other franchisees in the chain.
The franchisor can terminate the franchise agreement.

12. EVALUATING A FRANCHISE
Chapter 4
EVALUATING A FRANCHISE
Demand for product or service
Exclusive territory
Costs
Profitability
Longevity
Services provided by franchisor
Loss of independence
Cancellation

13. STARTING YOUR OWN BUSINESS
Chapter 4
STARTING YOUR OWN BUSINESS
Advantages of starting your own business
Disadvantages of starting your own business

14. Lesson 4.3 CHOOSE THE LEGAL FORM OF YOUR BUSINESS
Chapter 4
Lesson 4.3 CHOOSE THE LEGAL FORM OF YOUR BUSINESS
GOALS
Evaluate the different legal forms for a business.

15. TYPES OF BUSINESS ARRANGEMENTS
Chapter 4
TYPES OF BUSINESS ARRANGEMENTS
Sole proprietorship
Partnership
Corporation
S corporation

16. Chapter 4
SOLE PROPRIETORSHIP
A business that is owned exclusively by one person is a sole proprietorship.
Sole proprietorship is the most common form of ownership in the United States.
Disadvantages
Investment
Risk

17. PARTNERSHIP Shared decisions Shared investment Shared risk
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PARTNERSHIP
Shared decisions
Shared investment
Shared risk
Disadvantages
Partnership agreement

18. CORPORATION Share of stock Board of directors Dividends Disadvantages
Chapter 4
CORPORATION
Share of stock
Board of directors
Dividends
Disadvantages
Why incorporate?

19. Chapter 4
S CORPORATION
An S corporation is a corporation organized under subchapter S of the Internal Revenue Code whose income is taxed as a partnership.

20. CHARACTERISTICS OF THE LEGAL FORMS OF BUSINESS
Chapter 4
CHARACTERISTICS OF THE LEGAL FORMS OF BUSINESS
Sole Proprietorship
Partnership
Corporation
S Corporation
FEATURE
Simple to start
Decisions made by one person
Low initial cost
Limited liability
Limited government regulation
Ability to raise capital
Double taxation of profits