Business Ownership & Operations

1. Business Ownership & Operations Ch.6 – Glencoe Ch. 19, 35 & 40 - NFTE

2. Types of Business Ownership Sole Proprietorship– is a business owned by only one person Partnership – is a business owned by two or more people Corporation – is a business owned by many people but treated by law as one person Franchise – is a contractual agreement to sell a company’s products or services in a designated geographic area

3. Sole ProprietorshipAdvantages Relatively easy to start Owners pay Personal Income Tax on the business’s earnings Fewer government regulations than for the other forms of business Can make quick decisions and act without interference from others Keeps all the profits from the business

4. Sole ProprietorshipDisadvantages • Can be difficult to raise enough moneyby oneself to start or expand the business • Must often put in long hours • There is unlimited personal legal liability from lawsuits related to the business • Unlimited Liability - full responsibility for your company’s debts • No one to offer encouragement or feedback • The odds of failure are high

5. PartnershipAdvantages Limited Partnership- have no say in the daily operations of the business and have, as a result, limited liability Financing can be easier to secure Business risks, long hours, and legal liabilities are shared Different skills and contacts are brought into the business

6. PartnershipDisadvantages Profits must be shared Although shared, legal liability still includes personal property Disagreements among the partners can destroy the business Can be difficult and unpleasant to dissolve

7. Caution:Low-Flying Fish Nestled between the Waterfront on First and Pike find Seattle’s famous Pike Place Market. Merchants, travelers, and regulars have frequented this open-air market since 1907. In 1973, the Pike Place Merchants Association (PPMA) became officially incorporated as a nonprofit membership organization. What’s the aim of joining forces and starting an organization?

8. CorporationAdvantages • To raise money you can sell stock • Stock – shares of ownership in your corporation • Limited liability (and legal liability) – the personal assets of the officers or stockholders cannot be used to pay corporate details • Ownership can be transferred easily

9. CorporationDisadvantages • Are more heavily taxed than sole proprietorships or partnerships • Taxed twice: first, as the income of the corporation; and two, as dividends to the stockholders (must be declared as personal income on taxes) • Founder of a corporation (original entrepreneur) can lose control to the stock holders and board of directors, if they no longer own more than half the stock • Is more expensive • Are subject to many government regulations

10. Entrepreneur Spotlight • Steve Jobs, Apple Computers • Co-founder • Board of Directors fired him • Later, asked him to return to the company • Most recently, stepped down to President, and Tim Cook is now CEO

11. Four Types of Corporations • Subchapter-5 Corporation – the company must have fewer than 75 stockholders, no corporate, partnerships or non-resident alien shareholders, and non shareholders who are not U.S. citizens • Offers the legal protect of a C Corporation and without double taxation • Professional Corporation - Doctors, lawyers, architects, and other professionals can also incorporate themselves. • The initials “P.C.” after a person’s name indicate this • Nonprofit Corporation – aim to contribute to the greater good of society and are not seeking to make a profit • Also called 501(c )(3) corporations • C Corporation – sell ownership as shares of stock • Most big companies, stockholder vote on important company decisions, and to raise capital can sell more stock

12. Review What are some of the advantages of a sole proprietorship? What is the difference between a sole proprietorship and a partnership? If a partner makes a bad decision, what responsibility do the other partners have? What are the disadvantages of a corporation?

13. FranchiseAdvantages • Franchisor - person who teaches the business, and provides support and supplies • Growth with minimal capital investment • Lower marketing and promotion costs • Royalties – usually a percentage of the franchise’s sales is paid to the franchisor • Franchisee – the people who buy a franchise of a particular business • Ownership of a business with less risk than is involved in starting a business alone • Help with management and training • Advertising – the franchise chain can afford multiple platforms that the small-business owner could not finance alone

14. FranchiseDisadvantages • Franchisor • The franchisee may disregard the training and fail to operate the business properly, tarnishing the reputation of the franchise and the brand • It can be difficult to find qualities or trustworthy franchisees • Franchisees who do not experience success may try to sue the franchisor • Franchisee • Giving up control – much of the franchise’s operations are dictated by the franchisor • The franchisor may fail to deliver the promised training and support • The franchisor may engage in poor business practices that affect the earnings or image of the franchise

15. Entrepreneur Spotlight • Ray Kroc, McDonald’s • Opened in Des Plaines, Illinois, in 1955 • First franchisor to provide in-depth training to franchises • Almost guaranteed all restaurants would taste the same • By 1983, was a $3 billion dollar company with 7,778 locates in 30 countries • Turned a simple idea in an internationallyrecognized symbol of American enterprise

16. Caution:Low-Flying FIsh At 86 Pike Place, you’ll find the world-famous fish-flingers at Pike Place Fish. In 1965, John Yokoyama purchased it because he needed the money to make his car payments. What’s the benefit of going into business for youself?

17. Alternative Ways to Do Business • NonprofitOrganization – is a type of business that focuses on providing a service, rather than making a profit • Has to register with the government • Doesn’t have to pay taxes • Rely on government grants and donations from individuals or businesses • Donors do not get dividends like investors, but can deduct donations from their taxes

18. Alternative Ways to Do Business • Cooperative – is an organization owned and operated by its members for the purpose of saving money on the purchase of certain goods and services • Can sell stock and choose a board of directors • Pool resources to save money on buying insurance, supplies and advertising • Share factory facilities and warehouse space • Pay less in taxes

19. Entrepreneur Spotlight • Richard Hesse, E. Gunnard Lindquist, Frank Burke, & Oscar Fisher, Ace Hardware • Co-foundered in 1924 • Started as a cooperative • Allowed smaller stores to buy in bulk tocompete with larger stores • Currently has 4,400 stores that arefranchised and operated by a community member

20. Review What are some examples of franchise businesses? What types of assistance does the franchisor give a franchiser? How is a nonprofit organization like and unlike a corporation? What are some advantages of a cooperative?

21. Caution:Low-Flying Fish Pike Place Fish didn’t become world famous by advertising. (Instead a Spike Lee Levi’s commercial, NBC’s Frasier, and MTV’s Real World helped expose the market.) Pike Place prides itself on interacting with the people. The staff wants to give each person a memorable experience. Can a business have a contractual agreement with its customers?

22. Types of Businesses • Producer – is a business that gathers raw products in their natural state. • Processor – change raw materials into more finished products • Manufactures - are businesses that make finished products our of processed goods • Intermediary – is a business that moves goods from one business to another • Wholesale – distributes goods • Retailer – purchases goods from a wholesaler and resells them to the consumer, or final buyer • Service – provide services rather than goods

23. Caution:Low-Flying Fish Yokoyama has such a strong desire to empower other business leaders that he’s formed a consulting team. His commitment to his people and his customers is one model other businesses are learning in corporate training videos. What area does Pike Place Fish focus on other than fish?

24. Review What is the difference between a producer and a processor? What does an intermediary do? Give examples of service business.