Introduction to Business - Davis School District · Chapter 6 Introduction to Business, ... •...
Transcript of Introduction to Business - Davis School District · Chapter 6 Introduction to Business, ... •...
Back to Table of Contents
pp. 84-97
Chapter 6
Business Ownership
and Operations
Chapter 6
Introduction to Business, Business Ownership and Operations Slide 2 of 27
Why It’s Important
You need to understand business ownerships and operations before starting a business.
Chapter 6
Introduction to Business, Business Ownership and Operations Slide 3 of 27
Types of Business Ownership
The three different ways you can own
a business are:
• Sole proprietorship
• Partnership
• Incorporation
Chapter 6
Introduction to Business, Business Ownership and Operations Slide 4 of 27
Sole Proprietorship
A sole proprietorship is a business
owned by only one person.
Chapter 6
Introduction to Business, Business Ownership and Operations Slide 5 of 27
Sole Proprietorship
The advantages to having your own
business are:
• It’s easy to start
• You get to be your own boss
• You get to keep all the profits
• The taxes are usually low
Chapter 6
Introduction to Business, Business Ownership and Operations Slide 6 of 27
Sole Proprietorship
The disadvantages to having your own
business are:
• You have to pay for everything
yourself
continued
Chapter 6
Introduction to Business, Business Ownership and Operations Slide 7 of 27
Sole Proprietorship
• You might have to use your personal
savings or borrow money from the
bank
• You might lack business skills
Chapter 6
Introduction to Business, Business Ownership and Operations Slide 8 of 27
Sole Proprietorship
A serious disadvantage to owning a
sole proprietorship is that you have
unlimited liability, or full responsibility
for your company’s debts.
Chapter 6
Introduction to Business, Business Ownership and Operations Slide 9 of 27
Partnership
A partnership is a business owned by
two or more persons who share the
risks and rewards.
Chapter 6
Introduction to Business, Business Ownership and Operations Slide 10 of 27
Partnership
To start a partnership you need to
draw up a partnership agreement,
which is a contract that outlines the
rights and responsibilities of each
partner.
Chapter 6
Introduction to Business, Business Ownership and Operations Slide 11 of 27
Partnership
The advantages to partnership are:
• You might need only a license to
start and have to pay taxes only on
your personal profits.
• Each of your partners can contribute
money to start the business.
continued
Chapter 6
Introduction to Business, Business Ownership and Operations Slide 12 of 27
Partnership
• Banks are often more willing to lend
money to partnerships than sole
proprietorships.
• Your partners can bring different
skills to the business.
Chapter 6
Introduction to Business, Business Ownership and Operations Slide 13 of 27
Partnership
The disadvantages to partnership are:
• You not only share the risks with
your partners, you also share the
profits.
continued
Chapter 6
Introduction to Business, Business Ownership and Operations Slide 14 of 27
Partnership
• You might not get along with your
partners.
• You share unlimited legal and
financial liability with your partners.
Chapter 6
Introduction to Business, Business Ownership and Operations Slide 15 of 27
Making a Business Decision
1. What are the advantages and
disadvantages of “going solo” in a
business venture?
2. How can having a partner help launch and
grow a business? Are there any
drawbacks?
Chapter 6
Introduction to Business, Business Ownership and Operations Slide 16 of 27
Corporation
A corporation is a business owned by
many people but treated by law as one
person.
Chapter 6
Introduction to Business, Business Ownership and Operations Slide 17 of 27
Corporation
To form a corporation, you need to get
a corporate charter from the state your
headquarters is in.
Chapter 6
Introduction to Business, Business Ownership and Operations Slide 18 of 27
Corporation
To raise money, you can sell stock, or
shares of ownership in your
corporation.
Chapter 6
Introduction to Business, Business Ownership and Operations Slide 19 of 27
Corporation
For each share of common stock, the
stockholder gets a share of the profits
and a vote on how the business is run.
You also must have a board of
directors who control the corporation.
Chapter 6
Introduction to Business, Business Ownership and Operations Slide 20 of 27
Corporation
A major advantage of a corporation is
its limited liability.
If your company loses money, the
stockholders lose only what they
invested.
Chapter 6
Introduction to Business, Business Ownership and Operations Slide 21 of 27
Corporation
Another advantage is that the
corporation doesn’t end if the owners
sell their shares.
Chapter 6
Introduction to Business, Business Ownership and Operations Slide 22 of 27
Corporation
A disadvantage of a corporation is that
you often have to pay more taxes.
Chapter 6
Introduction to Business, Business Ownership and Operations Slide 23 of 27
Corporation
The government closely regulates
corporations.
Chapter 6
Introduction to Business, Business Ownership and Operations Slide 24 of 27
Corporation
It is more difficult to start a corporation
than a sole proprietorship or a
partnership and running a corporation
can be much more complicated.
Chapter 6
Introduction to Business, Business Ownership and Operations Slide 25 of 27
Franchise
A business relationship between two parties
which gives the franchisee:
• The right to sell a product or service using the
trademark or trade name of the franchiser
• The right to market a product or service using
the operating methods of the franchiser
• The obligation to pay the franchiser fees for
these rights.
Chapter 6
Introduction to Business, Business Ownership and Operations Slide 26 of 27
Franchise
• Product Distribution Franchises sell the
franchisers products only (supplier-dealer)
• Business Format Franchises not only use a
franchiser’s product, service, and trademark,
but also the complete method for conducting
the business (marketing plan)
Chapter 6
Introduction to Business, Business Ownership and Operations Slide 27 of 27
FranchisePros of Franchise Businesses
• Established Brand and Customer Base. By far, the biggest advantage of buying into an established
franchise is the strength of the brand and loyalty of its customers.
• Marketing Support. Franchises often have the support of a national campaign, as well as prepared
marketing materials for a local campaign.
• Reputable Suppliers. Franchisors often have established relationships with suppliers for all the
materials franchisees need.
• Business Support. There's a saying in franchising: "You're in business for yourself, but not by
yourself" because you have a network of support.
• Training. Some of the better (and more expensive) franchise operations offer management and
technical training.
• Financial Assistance. Some franchisors provide loans and other assistance to help franchisees.
• Access to Proprietary Methods. There's no need to reinvent the wheel as franchisees get access to
all the trade secrets.
• Ongoing Research and Development, New Products. Franchisees can stick to improving their
operations and let the franchisor spend the time and money developing new products.
• The Boss is You. As with owning any business that you own, you are in control of your destiny.
• Reduced Risk. For all of these reasons, starting a franchise of an established brand often has less
risk than starting a business from nothing.
Chapter 6
Introduction to Business, Business Ownership and Operations Slide 28 of 27
FranchiseCons of Franchise Businesses
• Initial Payout (Franchise Fee and Start-up Costs). Some of the bigger franchise operations can
involve a very large initial costs, often more than what it would cost to start your own business.
• Royalty Payments. For as long as you are a franchisee, you will have to pay some percentage of
the monthly gross back to the franchisor, reducing your profit potential.
• Marketing/Advertising Fees. To receive the wonderful marketing support from the franchisor,
franchisees must pay these fees, according to some contracts.
• Limited Creativity/Flexibility. Most franchise contracts have very explicit standards, allowing little or
no alterations or additions to the brand, stifling any creativity on the part of the franchisee. You
must use their system, follow their rules.
• Sole Sourcing. Some franchise contracts stipulate that franchisors must buy supplies only from an
approved list of suppliers, possibly at a higher cost.
• Locked into Operation by Long-Term Contract. If you don't do as much research as you should
have and find yourself with the wrong franchise, you may be stuck for many years.
• Dependent on Franchisor Success. The reputation of your franchise is only as good as that of the
franchisor, so any difficulties that the franchisor encounters will have a direct impact on you.
• False Expectations. Opening a franchise rather than starting your own business offers no
guarantees of success. You still need to be a sharp businessperson to make it work.
• Risk. There's always risk in starting any new business.
Chapter 6
Introduction to Business, Business Ownership and Operations Slide 29 of 27
Fast Review
1. What are some of the advantages
of a sole proprietorship?
2. What is the difference between a
sole proprietorship and a
partnership? continued
Chapter 6
Introduction to Business, Business Ownership and Operations Slide 30 of 27
Fast Review
3. If a partner makes a bad business
decision, what responsibility do the
other partners have?
4. What are the disadvantages of a
corporation?