copyright by paradigm publishing, inc. introduction to business chapter 5 selecting a form of...
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Copyright by Paradigm Publishing, Inc.
INTRODUCTION TO BUSINESS
CHAPTER 5
Selecting A Form of Business Ownership
Business Group Time
Have your contract together? Business Idea? Country? Schedule?
Business Plan
SBA web page Downloaded PPT’s? Have you all gone there?!?! Let’s go!
Also – article – why study business? Jobs!
National Association of Colleges and Employers' "Job Outlook 2009", these are 10 jobs that new graduates have a good chance of finding in 2009.
Accountants and auditors2006 employment: 1.27 million2016 employment: 1.5 millionPercentage increase: 18Best for: Accounting majorsDatabase administrators2006 employment: 119,0002016 employment: 154,000Percentage increase: 29Best for: Computer science, information science or management information systems majors
Electrical engineers2006 employment: 153,0002016 employment: 163,000Percentage increase: 6Best for: Engineering majors
Financial analysts2006 employment: 221,0002016 employment: 295,000Percentage increase: 33Best for: Finance, economics, business administration, accounting or statistics majors
Management analysts2006 employment: 29,0002016 employment: 30,600Percentage increase: 5.5Best for: Business administration majors
Marketing managers2006 employment: 167,0002016 employment: 192,000Percentage increase: 15Best for: Business administration majors
Mechanical engineers2006 employment: 226,0002016 employment: 235,000Percentage increase: 4Best for: Engineering majors
Network systems and data communications analysts2006 employment: 262,0002016 employment: 402,000Percentage increase: 53Best for: Computer science, information science or management information systems majors
Personal financial advisers2006 employment: 176,0002016 employment: 248,000Percentage increase: 41Best for: Accounting, business, finance, economics, mathematics or law majors
Sales managers2006 employment: 318,0002016 employment: 351,000Percentage increase: 10Best for: Business administration majors
Video
Second Chance Body Armor
Copyright by Paradigm Publishing, Inc.
Copyright by Paradigm Publishing, Inc.
Sole Proprietorship
Sole Proprietorship A business owned by a single owner. Sole proprietor: the owner of a sole
proprietorship. Characteristics of Successful Sole Proprietors
Willing to accept full responsibility Willing to work flexible hours Experience
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Advantages of a Sole Proprietorship All earnings go to the Sole Proprietor. Easy organization. Complete control. Lower taxes.
Disadvantages of a Sole Proprietorship Sole proprietor incurs all losses. Unlimited liability: no limit on the debts for which the
owner is liable. Limited funds. Limited skills.
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Partnership A business that is co-owned by two or more people. Partners: co-owners of a business. General partnership: a partnership in which all parties
have unlimited liability. Limited partnership: a firm that has some limited
partners. Limited partners: partners whose liability is limited to
the cash or property they contributed to the partnership. General partners: partners who manage the business,
receive a salary, share the profits or losses of the business, and have unlimited liability.
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Partnership
Advantages of a Partnership Additional funding Losses are shared More specialization
Disadvantages of a Partnership Control is shared Unlimited liability Profits are shared
WORST FORM – DO NOT DO THIS!!!!
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Partnership HYBRIDS
S-Corporations A firm that has 100 or fewer owners and
satisfies other criteria. The earnings are distributed to the owners and taxed at the respective personal income tax rate of each owner.
Limited Liability Company (LLC) A firm that has all the favorable features of a
typical general partnership but also offers limited liability for the partners.
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Corporation
Corporation A state-chartered entity that pays taxes and is
legally distinct from its owners. Charter: a document used to incorporate a
business. The charter describes important aspects of the corporation.
Bylaws: general guidelines for managing a firm.
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Copyright by Paradigm Publishing, Inc.
Corporation
How Stockholders Earn a Return May receive dividends from the firm Stock may increase in value
Private Versus Public Corporations Privately held: ownership is restricted to a
small group of investors. Publicly held: shares can be easily purchased
or sold by investors. Going public: the act of initially issuing stock to
the public.
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Corporation
Advantages of a Corporation Limited liability Access to funds Transfer of ownership
Disadvantages of a Corporation High organizational expense Financial disclosure Agency problems: when managers do not act as
responsible agents for the shareholders who own the business.
High taxes Capital gain: the price received from the sale of
stock minus the price paid for the stock.
Corporation
Illustration of Double Taxation
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CorporationComparison of Tax Effects on Corporations and Sole Proprietorships
Tax Effects on Corporations Tax Effects on Sole Proprietorships
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CorporationOnce a firm goes public, its stock price changes over time in response to demand for that stock by investors. The price is publicly displayed by the stock exchange. It can also be found on financial news websites and in some newspapers.
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Copyright by Paradigm Publishing, Inc.
Obtaining Ownership of an Existing Business
Assuming Ownership of a Family Business Purchasing an Existing Business Franchising
Franchise: an arrangement whereby a business owner allows others to use its trademark, trade name, or copyright, under specific conditions.
Obtaining Ownership of an Existing Business
Restaurants are commonly established as franchises. One of the most important benefits of a franchise restaurant is name recognition, which attracts more customers.
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Copyright by Paradigm Publishing, Inc.
Obtaining Ownership of an Existing Business Advantages of a Franchise
Proven management style Name recognition Financial support
Disadvantages of a Franchise Sharing profits Less control
The Popularity of Business-to-Business Franchises (franchises that serve other businesses)
Franchise Costs - 2009
The top 10 include (start-up costs)
Subway ($78.6K-238.3K) McDonald’s ($950.2K-1.8M) Liberty Tax Service ($53.8K-66.9K) Sonic Drive In ($1.2M-3.2M) Intercontinental Hotels Group (Varies) Ace Hardware ($243.5K-1M) Pizza Hut ($638K-2.97M) UPS Store ($171.2K-280K) Circle K ($161K-1.4M) Papa John’s ($135.8K-491.6K)
After Break
Chapter 6