Forms of Business Ownership - Intro to Business
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Transcript of Forms of Business Ownership - Intro to Business
Forms of
Business Ownership
INTRODUCTION TO BUSINESS (BUS 20)
JON WROTEN
ADJUNCT PROFESSOR
SIERRA COLLEGE
(Copyright – All Rights Reserved)
WHAT IS THE RIGHT FORM OF OWNERSHIP ?
There really is not one right form of ownership.
The correct form depends of the type of company, the
goals of the owners, and the plans of what the
company may become.
Factors such as tax considerations, liability exposure,
capital requirements and structure and ownership
control all play a role is determining which form is
correct for a business.
World’s Largest Companies by Revenue
RANK COMPANY INDUSTRY REVENUE
(USD billions)
CAPITALIZATION
(USD billions) EMPLOYEES HEADQUARTERS
1 Wal-mart Retail $476 $257 2,200,000 Arkansas, USA
2 Royal Dutch Shell Oil and gas $451 $243 90,000 London, England
3 Exxon Mobil Corporation Oil and gas $420 $438 76,900 Texas, USA
4 China National Petroleum
Corporation Oil and gas $425 1,668,072 Beijing, China
5 Sinopec Group Oil and gas $411 $81 401,000 Beijing, China
6 BP Oil and gas $379 $89 83,900 London, England
7 Saudi Aramco Oil and gas $311 54,041 Dhahran, Saudi Arabia
8 Vitol Commodities $303 2,800 Geneva, Switzerland
9 State Grid Corporation of
China Electric utility $290 1,564,000 Beijing, China
10 Total Oil and gas $240 $120 111,000 Courbevoie, France
World’s Largest Companies by Revenue
RANKING COMPANY INDUSTRY REVENUE
(USD billions)
CAPITALIZATION
(USD billions) EMPLOYEES HEADQUARTERS
11 Volkswagen Group Automotive $254 $77 502,000 Wolfsburg, Germany
12 Samsung Conglomerate $327 427,000 Seoul, Korea
13 Toyota Automotive $222 $149 326,000 Toyota, Japan
18 Apple Electronics $170 $510 80,300 California, USA
22 Berkshire Hathaway Conglomerate $162 $201 217,000 Nebraska, USA
23 General Motors Automotive $156 $40 284,000 Michigan, USA
24 Daimler Automotive $150 $64 275,087 Stuttgart, Germany
25 LG Corp Conglomerate $148 226,400 Seoul, Korea
26 General Electric Conglomerate $145 $212 287,000 Connecticut, USA
29 Allianz Financial services $140 $54 142,000 Munich, Germany
32 Cargill Food processing $136 158,000 Minnesota, USA
33 Ford Motor Company Automotive $134 $47 164,000 Michigan, USA
RANK EMPLOYER COUNTRY EMPLOYEES
1 Wal-Mart United States 2,200,000
2 China National Petroleum Corporation China 1,668,072
3 State Grid Corporation of China China 1,583,000
4 Sinopec China 1,021,979
5 Hon Hai Precision Industry Taiwan 961,000
6 China Post Group China 889,307
7 U.S. Postal Service United States 601,601
8 Volkswagen Germany 501,956
9 China Telecommunications China 491,447
10 Aviation Industry Corp. of China China 480,147
WORLD'S LARGEST PRIVATE EMPLOYERS, 2011
BASIC FORMS OF OWNERSHIP
Sole Proprietorship
Partnership
Corporation
Number Sales
72% 5%
4% 5%
24% 90%
Source: IRS, Tax year 2008
SOLE PROPRIETORSHIP
Ease of start/end
Be your own boss
Pride of ownership
Retain profit
No special taxes
Unlimited liability
Limited financial resources
Difficulty in mgmt.
Time commitment
Few fringe benefits
Limited growth
Limited life span
Advantages Disadvantages
PARTNERSHIP
More financial resources
Shared mgmt.
Longer survival
Advantages
Unlimited liability
Division of profits
Disagreements among partners
Difficult to terminate
Disadvantages
GENERAL
GP
GP
GP
GP
LIMITED
GP
TYPES OF PARTNERSHIPS
Passive Investor
Passive Investor
Passive Investor
CORPORATION
More money for investment
Limited liability
Separation of ownership/mgmt.
Ease of ownership change
Perpetual life
Size
Initial cost
Paperwork
Two tax returns
Termination difficult
Double taxation
Advantages Disadvantages
S CORPORATIONS
No more than 75 shareholders
Shareholders
Individuals
Estates
U.S. citizens or residents
1 class of stock
<25% of income can be passive
Tax rate = +5%
Slower-growing companies
Benefits change with new tax rules
MAKE-UP OF CORPORATE BOARDS
Retired officer of another firm 89%
CEO at another company 87%
Major company shareholder 73%
Ex-government official 53%
Academicians 50%
Corporate boards average 11 Directors. Most Directors by percentage are:
RANK FRANCHISE STARTUP COSTS
1 Subway Subs, salads $85.69K - 262.85K
2 Jan-Pro Franchising Int'l. Inc. Commercial cleaning $3.15K - 50.9K
3 7-Eleven Inc. Convenience Stores $30.79K - 1.63M
4 Vanguard Cleaning Systems Commercial cleaning $9.85K - 35.83K
5 Liberty Tax Service Tax preparation $56.79K - 69.9K
6 Chester's Chicken $4.63K - 321.32K
7 Jazzercise Inc. Dance-fitness classes, apparel and accessories $4.28K - 76.5K
8 Jimmy John's Gourmet Sandwiches Gourmet sandwiches $300.5K - 489.5K
9 Dunkin' Donuts Coffee, doughnuts, baked goods $294K - 1.51M
10 Anago Cleaning Systems Commercial cleaning $11.18K - 66.84K
TOP GROWTH FRANCHISES, 2013
RANK FRANCHISE STARTUP COSTS
11 Cellairis Franchise Inc. Cell-phone and accessories $33.4K - 439.01K
12 Cruise Planners-American Express Travel Cruise & travel agency $2.09K - 21.98K
13 Great Clips Hair salon $109.15K - 208.3K
14 H&R Block Tax preparation, electronic filing $31.5K - 148.69K
15 Anytime Fitness Fitness center $56.29K - 353.89K
16 Sport Clips Men's sports-theme hair salon $158.3K - 306.5K
17 Menchie's Self-serve frozen yogurt $218.32K - 385.16K
18 Mac Tools Automotive tools and equipment $86.19K - 240.3K
19 Papa John's Int'l. Inc. Pizza $129.91K - 644.21K
TOP GROWTH FRANCHISES, 2013
SURVIVAL AFTER STARTUP FRANCHISE VS. INDEPENDENT
0
10
20
30
40
50
60
70
80
90
100
1st Year 5th Year 10th Year
Independent
Franchise
FRANCHISES
Management & marketing ass’t
Personal ownership
Recognized name
Financial advice & ass’t
Lower failure rate
High start-up costs
Shared Profit
Management regulation
Coattail effects
Restrictions on selling
Fraudulent franchisors
Advantages Disadvantages
FRANCHISOR
Assigns Territory
Provides Financial Aid/Advice
Offers Merchandise/ Supplies at Competitive Price
Provides Training/Support
Business Expansion Using O.P.M.
FRANCHISEE
Pays Up-Front Costs
Makes Monthly Payment to Franchisor
Runs Business by Franchisor’s Rules/Procedures
Buys Materials from Franchisor/ Approved Supplier
1) Research officers & their business experience
2) Talk to current Franchisees
3) Get summary of any bankruptcy & litigation
4) Estimate all costs to set up franchise
5) Review franchise contract & three most recent financial statements
How to Avoid a Franchise Lemon