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 Accountants and auditors 2006 employment: 1.27 million 2016 employment: 1.5 million Percentage increase: 18 Best for: Accounting majors Database administrators 2006 employment: 119, employment: 154,000 Percentage increase: 29 Best for: Computer science, information science or management information systems majors Accountantsauditors Database administrators Electrical engineers 2006 employment: 153, employment: 163,000 Percentage increase: 6 Best for: Engineering majors Electrical engineers Financial analysts 2006 employment: 221, employment: 295,000 Percentage increase: 33 Best for: Finance, economics, business administration, accounting or statistics majors Financial analysts Management analysts 2006 employment: 29, employment: 30,600 Percentage increase: 5.5 Best for: Business administration majors Management analysts Marketing managers 2006 employment: 167, employment: 192,000 Percentage increase: 15 Best for: Business administration majors Marketing managers Mechanical engineers 2006 employment: 226, employment: 235,000 Percentage increase: 4 Best for: Engineering majors Mechanical engineers Network systems and data communications analysts 2006 employment: 262, employment: 402,000 Percentage increase: 53 Best for: Computer science, information science or management information systems majors Network systems and data communications analysts Personal financial advisers 2006 employment: 176, employment: 248,000 Percentage increase: 41 Best for: Accounting, business, finance, economics, mathematics or law majors Personal financial advisers Sales managers 2006 employment: 318, employment: 351,000 Percentage increase: 10 Best for: Business administration majors Sales managers

Video Second Chance Body Armor

Copyright by Paradigm Publishing, Inc.

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

Copyright by Paradigm Publishing, Inc. 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.

Copyright by Paradigm Publishing, Inc. 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.

Copyright by Paradigm Publishing, Inc. 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!!!!

Copyright by Paradigm Publishing, Inc. 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.

Copyright by Paradigm Publishing, Inc. 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.

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.

Copyright by Paradigm Publishing, Inc. 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 Copyright by Paradigm Publishing, Inc.

Corporation Comparison of Tax Effects on Corporations and Sole Proprietorships Tax Effects on CorporationsTax Effects on Sole Proprietorships Copyright by Paradigm Publishing, Inc.

Corporation Once 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. 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. 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 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