7.00 Understand marketing and business management.

1. 7.00 Understand marketing and business management. 7.02 Apply knowledge of business ownership to establish and continue business operations.

2. Business Ownership • Sole Proprietorship • Partnership • Corporation • Franchise

3. Sole proprietorship • A business owned and run by one person • The business is typically managed by the owner. • Formation varies by state.

4. Advantages • Easy to start up • Complete control of the business • Owner receives all the profits • Limited taxes (one time taxation)

5. Disadvantages • Limited capital (money) • Unlimited liability (responsible for ALL debt) • The business is limited to the lifetime of the owner

6. Partnership • A business owned and controlled by two or more people who have entered a written agreement • The management of the company depends on the partnership agreement.

7. Advantages • More capital and credit available than a sole proprietorship • Combined resources (money, expertise) • Shared management responsibilities • Shared risk • Work load easier to manage than a sole proprietorship

8. Disadvantages • Profits are shared • Responsible for each others decisions • Potential for disagreement among partners • Unlimited liability (depending on type)

9. Types of Partnerships • Limited Liability Partnership • Identifies some investors who cannot lose more than the amount of their investment • Investors are not allowed to participate in the day-to-day business management • General Partnerships – a partner plays an active role and has unlimited liability (every partnership must have at least one general partner).

10. Corporations • An organization owned by one or more shareholders and managed by a board of directors. • Ownership • Determined by purchase of stock • A stockholder, or shareholder, owns a ‘piece’ of the company • One share of common stock equals one vote

11. Advantages • Easier to obtain capital • Limited liability for shareholders • Life of the corporation is unlimited

12. Disadvantages • Double taxation (profits and earnings) • Government regulations and legal restrictions • Decision-making shared among managers, board of directors, and shareholders

13. Specialized Corporations • Subchapter S (S-corporation) • treats partners as individuals by taxing them once • Limited Liability Company • Provides limited liability protection for owners • Nonprofit corporation • A group of people who join to do some activity that benefits the public

14. Corporation Terms • MERGER: Two individual businesses that combine to form one organization • CONSOLIDATION: A form of business growth in which a corporation acquires many smaller companies • EXPANSION: A business strategy in which growth is obtained by increasing the number of stores in which customers can buy a company's products and services.

15. Types of Corporations continued • Public-established for a governmental purposes Examples • National Science Foundation • Export-Import Bank of the United States • Private-established by individuals for business or charitable purposes. Examples • Enterprise Rent-A-Car • American Cancer Society

16. Franchise • Permission to operate a business to sell products and services in a set way • Begins with a parent company who owns the product or service and grants the right to another business • Franchiser: the company that owns the product • Franchisee: the company purchasing the right to run the business

17. Types of Franchises • Business-format • Requires franchisee to sell products or service in a specific format • Product trade-name • Allows franchisee to sell specific products. This format is usually formed by automobile, appliance, and petroleum product