chapter 2 notes new book
DESCRIPTION
TRANSCRIPT
![Page 1: Chapter 2 notes new book](https://reader034.vdocuments.net/reader034/viewer/2022052307/54c1dcf14a7959a3528b45fb/html5/thumbnails/1.jpg)
Chapter 2
Objectives:
Methods of going into business
Legal forms of business
![Page 2: Chapter 2 notes new book](https://reader034.vdocuments.net/reader034/viewer/2022052307/54c1dcf14a7959a3528b45fb/html5/thumbnails/2.jpg)
1919: J.W. Longaberger took a job with the Dresden Basket Factory
Great Depression: The factory closed, and J.W. got a job at a paper mill, but kept making baskets nights & weekends
1936: J.W. and his wife Bonnie purchased the Dresden Basket Factory, which they ran with their 12 children.
Longaberger Baskets
![Page 3: Chapter 2 notes new book](https://reader034.vdocuments.net/reader034/viewer/2022052307/54c1dcf14a7959a3528b45fb/html5/thumbnails/3.jpg)
1934: Dave Longaberger born Stuttered, had epilepsy, spent 3 years in 5th
grade Very ambitious – family called him the “25
cent millionaire”– worked in a grocery store, – shoveled snow, – delivered papers, – mowed grass,– hauled trash, – ran the projectors at the local movie house
Longaberger Baskets
![Page 4: Chapter 2 notes new book](https://reader034.vdocuments.net/reader034/viewer/2022052307/54c1dcf14a7959a3528b45fb/html5/thumbnails/4.jpg)
1963: Dave Longaberger and his wife bought & ran “Harry’s Dairy Bar”.
Bought A&P and ran it Dave noticed department stores selling
imported baskets, and asked his father, J.W., to make some baskets–they sold well.
1971: Opened J.W.’s Handwoven Baskets 1978: Figured out that the best way to sell
the baskets was home shows
Longaberger Baskets
![Page 5: Chapter 2 notes new book](https://reader034.vdocuments.net/reader034/viewer/2022052307/54c1dcf14a7959a3528b45fb/html5/thumbnails/5.jpg)
1984: Dave’s daughter Tami joined the family business.
1994: Tami became president Today, 45,000 “home consultants” sell
Longaberger baskets.
Longaberger Baskets
![Page 6: Chapter 2 notes new book](https://reader034.vdocuments.net/reader034/viewer/2022052307/54c1dcf14a7959a3528b45fb/html5/thumbnails/6.jpg)
Monty Tech Entrepreneur of the Week: Josh Miner - Miner Leaks LinkedIn Plumbing Class of 2002
![Page 7: Chapter 2 notes new book](https://reader034.vdocuments.net/reader034/viewer/2022052307/54c1dcf14a7959a3528b45fb/html5/thumbnails/7.jpg)
Methods of Going Into Business
Buy an existing business Start from scratch Buy a franchise
Reminder: –Entrepreneur interviews due Friday
![Page 8: Chapter 2 notes new book](https://reader034.vdocuments.net/reader034/viewer/2022052307/54c1dcf14a7959a3528b45fb/html5/thumbnails/8.jpg)
Advantages of buying an existing business?
![Page 9: Chapter 2 notes new book](https://reader034.vdocuments.net/reader034/viewer/2022052307/54c1dcf14a7959a3528b45fb/html5/thumbnails/9.jpg)
Buy an Existing Business - Advantages Proven record Established clientele Established location Bank and supplier relationships Trained employees Established facilities Low purchase price
![Page 10: Chapter 2 notes new book](https://reader034.vdocuments.net/reader034/viewer/2022052307/54c1dcf14a7959a3528b45fb/html5/thumbnails/10.jpg)
Disadvantages of Buying an Existing Business?
![Page 11: Chapter 2 notes new book](https://reader034.vdocuments.net/reader034/viewer/2022052307/54c1dcf14a7959a3528b45fb/html5/thumbnails/11.jpg)
Buy an Existing Business - Disadvantages Poor record? Ill will? Wrong location? Poor physical condition?
![Page 12: Chapter 2 notes new book](https://reader034.vdocuments.net/reader034/viewer/2022052307/54c1dcf14a7959a3528b45fb/html5/thumbnails/12.jpg)
How do you find a business to buy?
Advertised in classified (“Business opportunities” section)
Business broker Chamber of Commerce Small Business Administration Bankruptcy announcements Word of mouth
![Page 13: Chapter 2 notes new book](https://reader034.vdocuments.net/reader034/viewer/2022052307/54c1dcf14a7959a3528b45fb/html5/thumbnails/13.jpg)
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 brokers to investigate specific opportunities.
Visit during business hours. Ask for complete financial accounting
for the past 3 years.
![Page 14: Chapter 2 notes new book](https://reader034.vdocuments.net/reader034/viewer/2022052307/54c1dcf14a7959a3528b45fb/html5/thumbnails/14.jpg)
Purchase Steps Ask for important information in writing
– Complete list of assets to be transferred– Statement about any past or pending legal action
against the business– A copy of the business lease or mortgage– List of all suppliers
Determine how you would finance the business.
Get expert help to determine a price to offer for the business.
![Page 15: Chapter 2 notes new book](https://reader034.vdocuments.net/reader034/viewer/2022052307/54c1dcf14a7959a3528b45fb/html5/thumbnails/15.jpg)
Advantages of Starting From Scratch?
![Page 16: Chapter 2 notes new book](https://reader034.vdocuments.net/reader034/viewer/2022052307/54c1dcf14a7959a3528b45fb/html5/thumbnails/16.jpg)
Start from Scratch - Advantages
Freedom to make decisions Opportunity to develop image Choice of location Choice of physical facilities
![Page 17: Chapter 2 notes new book](https://reader034.vdocuments.net/reader034/viewer/2022052307/54c1dcf14a7959a3528b45fb/html5/thumbnails/17.jpg)
Disadvantages of Starting from Scratch?
![Page 18: Chapter 2 notes new book](https://reader034.vdocuments.net/reader034/viewer/2022052307/54c1dcf14a7959a3528b45fb/html5/thumbnails/18.jpg)
Start from Scratch - Disadvantages No record No established clientele Time-consuming tasks
– Training new employees– Installing machinery, display cases,
furniture– Ordering goods
Difficulty in obtaining a loan
![Page 19: Chapter 2 notes new book](https://reader034.vdocuments.net/reader034/viewer/2022052307/54c1dcf14a7959a3528b45fb/html5/thumbnails/19.jpg)
Buy a Franchise
Franchise: contract Franchisee: person who purchases the
name/concept Franchiser: corporation who sells the
name/concept
![Page 20: Chapter 2 notes new book](https://reader034.vdocuments.net/reader034/viewer/2022052307/54c1dcf14a7959a3528b45fb/html5/thumbnails/20.jpg)
Advantages of Purchasing a Franchise?
![Page 21: Chapter 2 notes new book](https://reader034.vdocuments.net/reader034/viewer/2022052307/54c1dcf14a7959a3528b45fb/html5/thumbnails/21.jpg)
Advantages of a Franchise
Start-up help Advertising Financial assistance Established brand name Proven method Equipment and supplies may be less
expensive
![Page 22: Chapter 2 notes new book](https://reader034.vdocuments.net/reader034/viewer/2022052307/54c1dcf14a7959a3528b45fb/html5/thumbnails/22.jpg)
Disadvantages of Purchasing a Franchise?
![Page 23: Chapter 2 notes new book](https://reader034.vdocuments.net/reader034/viewer/2022052307/54c1dcf14a7959a3528b45fb/html5/thumbnails/23.jpg)
Disadvantages of a Franchise
Limited control Franchise fees
– Initial franchise fee– Royalty fees (weekly or monthly)
Potential image problem The franchisor can terminate the
franchise agreement
![Page 24: Chapter 2 notes new book](https://reader034.vdocuments.net/reader034/viewer/2022052307/54c1dcf14a7959a3528b45fb/html5/thumbnails/24.jpg)
Evaluation of a franchise
What can a franchise do for me that I can’t do for myself?
What is the future for this product or service?
How is the contract? Are there enough potential customers? Is this a good fit for me, financially and
the type of business?
![Page 25: Chapter 2 notes new book](https://reader034.vdocuments.net/reader034/viewer/2022052307/54c1dcf14a7959a3528b45fb/html5/thumbnails/25.jpg)
Sidelines
Work full time and run a business Advantage: financial security Disadvantage: less time to make
business successful
![Page 26: Chapter 2 notes new book](https://reader034.vdocuments.net/reader034/viewer/2022052307/54c1dcf14a7959a3528b45fb/html5/thumbnails/26.jpg)
Family Business
Do you have a business in your family? What are advantages of a family
business? What are disadvantages of a family
business?
![Page 27: Chapter 2 notes new book](https://reader034.vdocuments.net/reader034/viewer/2022052307/54c1dcf14a7959a3528b45fb/html5/thumbnails/27.jpg)
Home-based Businesses
Advantage: – cheaper – More convenient
Disadvantages: – Sometimes perceived as less professional– Lack of privacy
![Page 28: Chapter 2 notes new book](https://reader034.vdocuments.net/reader034/viewer/2022052307/54c1dcf14a7959a3528b45fb/html5/thumbnails/28.jpg)
Legal Forms of Business
Sole Proprietorship Partnership Corporation S Corporation Limited Liability Corporation
![Page 29: Chapter 2 notes new book](https://reader034.vdocuments.net/reader034/viewer/2022052307/54c1dcf14a7959a3528b45fb/html5/thumbnails/29.jpg)
Advantages of a Sole Proprietorship Easy to start All profits to owner Complete control & flexibility Secrecy Single taxation Easy dissolution
![Page 30: Chapter 2 notes new book](https://reader034.vdocuments.net/reader034/viewer/2022052307/54c1dcf14a7959a3528b45fb/html5/thumbnails/30.jpg)
Disadvantages of a Sole Proprietorship Unlimited liability Limited life of business Difficulty in obtaining capital Little incentive for employees
![Page 31: Chapter 2 notes new book](https://reader034.vdocuments.net/reader034/viewer/2022052307/54c1dcf14a7959a3528b45fb/html5/thumbnails/31.jpg)
Advantages of a Partnership
Easy startup– Articles of Partnership– Partnership Agreement (see p. 38)
Added capital Combined management skills Single taxation Employee incentives
![Page 32: Chapter 2 notes new book](https://reader034.vdocuments.net/reader034/viewer/2022052307/54c1dcf14a7959a3528b45fb/html5/thumbnails/32.jpg)
Disadvantages of a Partnership
Unlimited liability Limited life of business Divided authority Frozen investment
![Page 33: Chapter 2 notes new book](https://reader034.vdocuments.net/reader034/viewer/2022052307/54c1dcf14a7959a3528b45fb/html5/thumbnails/33.jpg)
Corporation
An enterprise that has the legal rights, duties, and powers of a person
Charter – written document outlining the conditions under which the corporation will operate
Stockholders – owners of a corporation Stock – shares of ownership in a
corporation
![Page 34: Chapter 2 notes new book](https://reader034.vdocuments.net/reader034/viewer/2022052307/54c1dcf14a7959a3528b45fb/html5/thumbnails/34.jpg)
Corporation
Board of Directors – meet several times a year to elect senior officers, determine their salaries, set corporation’s rules for conducting business
Dividends – distributions of profit to shareholders by corporations
![Page 35: Chapter 2 notes new book](https://reader034.vdocuments.net/reader034/viewer/2022052307/54c1dcf14a7959a3528b45fb/html5/thumbnails/35.jpg)
Advantages of a Corporation
Limited Liability Continuous life Easy transfer of ownership Ability to attract funds Specialized management
![Page 36: Chapter 2 notes new book](https://reader034.vdocuments.net/reader034/viewer/2022052307/54c1dcf14a7959a3528b45fb/html5/thumbnails/36.jpg)
Disadvantages of a Corporation
Government regulation Little secrecy Charter restrictions Complicated and expensive formation Double taxation
![Page 37: Chapter 2 notes new book](https://reader034.vdocuments.net/reader034/viewer/2022052307/54c1dcf14a7959a3528b45fb/html5/thumbnails/37.jpg)
S Corporation
A corporation that chooses Subchapter S status for tax purposes
Must meet the following requirements:– No more than 35 shareholders– Only one class of stock– All shareholders are U.S. residents– All shareholders are individuals– Corporation operates on a calendar year
financial basis
![Page 38: Chapter 2 notes new book](https://reader034.vdocuments.net/reader034/viewer/2022052307/54c1dcf14a7959a3528b45fb/html5/thumbnails/38.jpg)
Advantages of an S Corporation
Limited liability Single taxation – income passes
through to individual shareholders and are reported on their tax returns
![Page 39: Chapter 2 notes new book](https://reader034.vdocuments.net/reader034/viewer/2022052307/54c1dcf14a7959a3528b45fb/html5/thumbnails/39.jpg)
Disadvantages of an S Corporation Owners may be required to pay taxes
on earnings even if they have not taken any money out of the business
![Page 40: Chapter 2 notes new book](https://reader034.vdocuments.net/reader034/viewer/2022052307/54c1dcf14a7959a3528b45fb/html5/thumbnails/40.jpg)
Limited Liability Corporation
Same advantages & disadvantages as an S Corporation, but easier to set up
When you’re ready to start a business for real, SEE A LAWYER and understand the current situation!!!
![Page 41: Chapter 2 notes new book](https://reader034.vdocuments.net/reader034/viewer/2022052307/54c1dcf14a7959a3528b45fb/html5/thumbnails/41.jpg)
Form 2 – Write a paragraph on each question:
Do you plan to buy an existing business, start a business from scratch, or buy a franchise? What are the advantages and disadvantages of this choice?
What legal organization will you choose for your company? What are the advantages and disadvantages of this choice?