business structures. types of business structures sole proprietor partnership general partnership ...
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BUSINESSBUSINESS STRUCTURESSTRUCTURES
Types of Business Structures
Sole Proprietor Partnership
General PartnershipLimited PartnershipLimited Liability Partnership
Corporations Others (Franchises, Co-ops, Nonprofits)
ADVANTAGES OF BEING A
SOLE PROPRIETOR
EASY START UPFEW 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 PERMANENCEIF THE OWNER DIES, THE BUSINESS COULD DIE TOO.
LIMITED RESOURCESONE PERSON, ONE SOURCE OF CAPITAL (money)
RESPONSIBILITY AND TIME COMMITMENT RESTS ON ONE PERSON
THREE TYPESOF
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 personallyOther 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 UPFEW 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
http://www.nyse.com/about/listed/lcddata.html?ticker=YUM
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 MERGERCOMPANIES FROM SAME INDUSTRY JOIN TOGETHER
MERGERS
VERTICAL MERGERCombination of two or more firms involved in different stages of producing the same good or service
CONGLOMERATEBusiness combination
of more than 3 businesses that make
unrelated products
MULTINATIONAL
CORPORATION THAT OPERATES IN MORE THAN ONE COUNTRY
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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 PROSSTANDARDIZED QUALITY THAT PEOPLE TRUST
NATIONAL ADVERTISING
…EVEN MORE PROSFINANCIAL ASSISTANCE FROM
MOTHER CORP.CORP. BUYS IN BULK SAVING
MONEY FOR FRANCHISE OWNER
CONS OF FRANCHISESHIGH FEE AND ROYALTY PAYMENTS
STRICT STANDARDS OF OPERATION
…MORE CONSPURCHASING RESTRICTIONS (you must buy from mother corp.)
LIMITED PRODUCT LINE (can’t develop own goods)
Dunkin' DonutsCost of Franchise: $40,000 to $80,000
Average total start up costs vary depending on location.
KFCCost 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 USACost of Franchise $45,000
Average running costs $950,000 to $1,800,000
Massage EnvyCost of Franchise $39,000
Average Start up costs $290,000 to $470,000
Pizza HutCost 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 ToolsCost of Franchise: From $5,000 to $15,000
Average total start up costs: From $17,000 to $280,000
SubwayCost of Franchise: $15,000
Average total start up costs: From 80 to 240 thousand US$, depending on location.
SupercutsCost of Franchise: $22,500
Average total start up costs: From 110 to 240 thousand us$