ch 5 powerpoint

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Advantages and disadvantages sole proprietorship
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advantage: own hours. Own boss. Own salary. Easy to start and easy to end. You take out a loan personally (like the business doesn’t take out a loan you yourself do), no special taxes. Disadvantage: if you loose all your money, its on you (unlimited liability). 24/7. difficult to raise capital (raise money, like the bank would say why should I give you a money on a loan). Talent (you have to do your own marketing). Limited resources .
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limited partner cannot help you
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run a business
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general partnership
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everybody’s liable for everything. all owners share in operating the business and in assuming liability for a businesses debt
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Limited partnership
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opportunity for you to have a partner who gives you money invests in your partnership but doesn’t work in the business at all. They provide money and they don’t help you run the business. The advantage is that they get limited liability. Limited partners have limited liability. They can invest in your business but if something happens and the business doesn’t work out great, we cant go after their house, we cant go after their bank account. The only thing they would loose is the amount of money they invested in the first place. a partnership with one or more general partners and one or more limited partners
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partnership advantages
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partnership agreement (specify how new partners are brought in, how are we going to terminate partnership if someone gets killed or something)
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corporations
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don’t have to be huge. People corporate because they have limited liability. The only thing that people can take from you is the thing that the business owns. People cannot sue you yourself, but they can sue the corporation. Disadvantage of corporation: is that its difficult to get started. Its more difficult than a sole proprietor, there’s more paperwork more fees. Really easy to change ownership.you’re working for somebody. Everybody works for somebody. Corporation advantage: you have the ability to sell stocks and bonds. corporations don’t have to be publicly traded
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Advantage of franchise
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youre your own boss. Brand recognition (you don’t have to do the advertising) (like you can open a mcdonalds, but everyone already knows what mcdonalds is)
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Disadvantage of franchise
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it’s a bigger risk. You don’t have all the people rooting for you (you’re the enemy) you’re on your own. If you don’t franchise you don’t know if your business will be successful.
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Each type of partnership has advantages and disadvantages.
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In a general partnership resources are pooled and liability is spread among all partners. However, in this type of partnership there is the possibility for disagreement and/or personality conflicts. A limited partnership is made up of a mixture of general partners and limited partners. Limited partners cannot actively take part in business dealings.
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The limited partner is not able to
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exercise any management control over the partnership, but maintains limited liability. A limited partner’s liability is limited to the amount invested in the partnership.
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partnership advantage
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partnerships have access to more resources, such as financial resources, management skills and knowledge
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limited vs general partner
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A general partner is an owner who has unlimited liability and can be active in managing the firm. A limited partner is an owner who invests money in the business, but does not have any management responsibility or liability for losses beyond his or her investment.
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advantages and disadvantages of partnerships
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Some of the advantages of partnerships are: More financial resources, shared management and pooled/complementary skills and knowledge, longer survival, no special taxes. Disadvantages of partnerships include: Unlimited liability (for general partners), division of profits, disagreements among partners, difficulty of termination.
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The major advantage of corporate ownership
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is limited liability protection (personal assets are protected).
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major disadvantage of corporation
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double taxation.
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advantage of s corporation
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that it avoids the double taxation of a C corporation. Approximately 3 million U.S. companies operate as S corporations.
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limited liability company advantage
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limited liability and flexibility
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disadvantages entrepreneurs
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limited life span and paperwork
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Advantages and disadvantages incorporating a business include
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Limited liability, ability to raise more money for investment, size, perpetual life, ease of ownership change, ease of attracting talented employees, separation of ownership from management. Disadvantages of incorporating are: Initial cost, extensive paperwork, double taxation, two tax returns, size, difficulty to terminate, possible conflict with stockholders and board of directors.
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What’s the role of owners (stockholders) in the corporate hierarchy?
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Stockholders do not have to be employees of the corporation. They are investors who have limited liability. Stockholders elect the board of directors of a company who select the management to control the company.
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If you buy stock in a corporation and someone gets injured by one of the corporation’s products, can you be sued? Why or why not?
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Stockholders in a corporation have limited liability meaning as owners they are responsible for its losses only up to the amount they invested. The corporation could be sued and forced out-of-business but the stockholder would only lose what he/she invested.
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Why are so many new businesses choosing a limited liability company (LLC) form of ownership?
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Limited liability companies have become a popular way to form a business since all fifty states now recognize LLCs. Some of the advantages of LLCs are: Limited liability, choice of taxation (can be taxed as a partnership or corporation), flexible ownership rules, flexible distribution of profit and losses, operating flexibility.
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What are some of the factors to consider before buying a franchise?
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Before buying a franchise be sure to check a company’s (franchisers) resources and reputation. There are many franchising scams. The checklist in this chapter gives advice about things to consider before buying a franchise.
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What opportunities are available for starting a global franchise?
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Successful franchising in global markets offers the same opportunities as in domestic markets. However, franchisers must be careful to adapt to the region where they wish to expand. McDonald’s for example has more than 33,000 restaurants in 119 countries.
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cooperative
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a form of business that is owned and controlled by the people who use it—producers, consumers, or workers with similar needs who pool their resources for mutual gain. Cooperatives are a major force in agriculture and other industries today.
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forms of ownership
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sole proprietorship, partnership, corporation
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sole proprietorship
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a business owned, and usually managed by one person
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partnership
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two or more people legally agree to become co owners of a business
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corporation
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a legal entity with authority to act and have liability apart from its owners
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benefits of sole proprietorship
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ease of starting and ending the business. being your own boss, pride of ownership, leaving a legacy, retention of company profit, no special taxes
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disadvantages of sole proprietorships
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unlimited liability, limited financial resources, management difficulties, overwhelming time commitment, few fringe benefits, limited growth, limited life span
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unlimited liability
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any debts or damages incurred by the business are your own debts, even if ti means selling your home, car, or anything else
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types of partnerships
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general and limited
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types of partners
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general and limited
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general partner
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an owner (partner) who has unlimited liability and is active in managing the firm
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limited partner
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owner who invests money in the business but also enjoys limited liability
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limited liability
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liability for the debts of the business is limited to the amount of the limited partner puts into the company; personal assets are not at risk
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forms of partnerships
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master and limited
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master limited partnership
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a partnership that looks much like a corporation, but is taxed like a partnership and thus avoids the corporate income tax
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limited liability partnership
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limits partners risk of losing their personal assets to the outcomes of only their own acts and omissions and those of people under their own acts and omissions and those of people under their supervision
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advantages of partnerships
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more financial resources, shared management and pooled/complementary skills and knowledge, longer survival, no special taxes
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disadvantages of partnerships
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unlimited liability, division of profits, disagreements among partners, difficult to terminate
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conventional corporation
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a state chartered legal entity with authority to act and have liability separate from its owners (its stockholders)
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advantages of corporations
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limited liability, ability to raise money for investment, size, perpetual life, ease of ownership change, ease of attracting talented employees, separation of ownership from management
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disadvantages of corporations
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initial cost, extensive paperwork, double taxation, two tax returns, size, difficulty of termination, possible conflict with stockholders and board of directors
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s corporations
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a unique government creation that looks like a corporation, but is taxed like sole proprietorships and partnerships. have shareholders, directors and employees, plus the benefit of limited liability. profits are taxed only as the personal income of the shareholder
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qualifications of S corporations
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have no more than 100 shareholders. have shareholders that are individuals or estates and are citizens of permanent residents of the US, have only one class of stock, derive no more than 25% of income from passive sources. if an S corporation looses its s status, it may not operate under it again fro at least 5 years
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limited liability company
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similar to an S corporation, but without the eligibility requirements
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advantages of limited liability companies
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limited liability, choice of taxation, flexible ownership rules, flexible distribution of profits and losses, operating flexibility
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disadvantages of limited liability companies
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no stock, therefore ownership is nontransferable, limited life span, fewer incentives, taxes, paperwork
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merger
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the result of 2 firms joining to form one company
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acquisition
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one company purchase of the property and obligations of another company
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franchise agreement
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an agreement where by someone with a good idea for a business (franchiser) sells the rights to use the business name and sell a product service (franchise) to others (franchisees) in a given territory
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advantages of franchising
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management and marketing assistance, personal ownership, nationally recognized name, financial advice and assistance, lower failure rate
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disadvantages of franchising
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large start up costs, shared profit, management regulation, coattail effects, restrictions on selling, fraudulent franchisers

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