SELECT A TYPE OF OWNERSHIP Entrepreneurship 11/13/2018 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

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.

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.

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.

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

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

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.

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.

OPERATING COSTS OF A FRANCHISE Chapter 4 OPERATING COSTS OF A FRANCHISE Initial franchise fee Start-up costs Royalty fees Advertising fees

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.

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.

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

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

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.

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

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

PARTNERSHIP Shared decisions Shared investment Shared risk Chapter 4 PARTNERSHIP Shared decisions Shared investment Shared risk Disadvantages Partnership agreement

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

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.

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