Unit 3 01 Business Knowhow Modified by CMagno

Unit 3. 01 Business… Know-how Modified by CMagno

Entrepreneurs… OR Modified by CMagno

Entrepreneur A person who assumes risk of starting and operating a business for the purpose of making a profit

Acquiring a Business review… Take over a family business ¡ Buy an existing business ¡ Start a business on your own ¡ Modified by CMagno

Proprietorship One Owner Modified by CMagno

Sole Proprietorship ¡ Advantages l l l ¡ Easy start up All profits to owner Business pays no income tax Little government regulations Direct control Disadvantages Modified by CMagno l l Unlimited liability Difficulty in financing Limited life (death) All losses responsibility of owner

Partnership ¡ Two or more owners Modified by CMagno

Partnership ¡ Advantages l l ¡ Easy start up Business pays no income tax Limited government regulations Shared financing and losses Modified by CMagno Disadvantages l l Unlimited liability Shared profits Limited life(death) Shared control

Partnership ¡ General l OR ¡ All partners are general All partnersunlimited liability All partners-full management of business Limited l l l Modified by CMagno Usually an investor (called limited partner) The investor : Usually does not manage day-to-day activities Usually limited to the extent of the investment

General Partnership ¡ ¡ ¡ A partnership (also referred to as a general partnership). It is a business arrangement where two or more people (who are not husband wife) are owners of a business. Unlike a corporation, you do not need to file any documents with the state to make your business a partnership. All of the partners have the ability to actively manage or control the business. Each partner will have equal authority. Modified by CMagno

Limited Partnership ¡ ¡ A limited partnership is different from a general partnership in that it requires a partnership agreement. Some information about the business and the partners must be filed with the appropriate state agency (usually the secretary of state). Modified by CMagno

Limited Partnership ¡ ¡ ¡ A limited partnership must have at least one general partner. The partnership agreement will specify exactly which partner or partners have certain responsibilities and which have certain authority. If you need a business type that limits the liability of all partners, LLC formation could be your best choice. Modified by CMagno

Why choose a general partnership? ¡ Ease of creation. l No state filing is required. l ¡ The partnership is created when the partners begin business activities. Low cost of operation. l l They are not required to pay a formation filing fee, ongoing state fees or franchise taxes. The partnership must still obtain the business licenses and permits required for operation however. ¡ Few ongoing requirements. l Unlike corporations, general partnerships are not required to: ¡ Hold annual meetings of the owners, ¡ Issue partnership interest, ¡ Keep personal asset separate from business assets. ¡ Having a partnership agreement that outlines how the partnership will be managed, the roles of each partner, and what events will cause the partnership to end operations is recommended. Modified by CMagno

Why choose a limited partnership? ¡ Unlimited liability for general partners only. l l l ¡ In a limited partnership (LP), at least one partner has unlimited liability —the general partner(s). The other partners (limited partners) have limited liability, Meaning their personal assets typically cannot be used to satisfy business debts and liabilities. The amount of their liability is limited to their investment in the LP. Limited partners are not involved in management. l ¡ The general partners oversee the day-to-day operations of the LP. Limited partners are basically silent investors General partners ARE involved in management Modified by CMagno

Partnership Modified by CMagno

Corporation ¡ ¡ ¡ Owned by stockholders or shareholders Stockholders (Shareholders) are individuals, or companies that own shares of a for-profit corporation. The individuals own a specific number of shares, which they each purchased at a specific price. The stockholders have invested their money to purchase these shares and they gain in two ways (1) through dividends paid on these shares due to the corporation's profits, (2) by selling their shares at a profit. Modified by CMagno

Corporation ¡ Advantages l l ¡ Limited liability Ease in raising capital $$$ Continuity of business Ownership is easily transferred Modified by CMagno Disadvantages l l l Expensive to form Profits depend on investment Double taxation Lack of control by owners High government regulations

Franchise ¡ ¡ A type of license that a party (franchisee) acquires to allow them to have access to a business's (the franchisor) proprietary knowledge, processes and trademarks in order to allow the party to sell a product or provide a service under the business's name. In exchange for gaining the franchise, the franchisee usually pays the franchisor initial start-up and annual licensing fees. Modified by CMagno

Franchise ¡ Advantages l l Disadvantages Established name Reduced risk of failure Benefit of national name Training provided § § Modified by CMagno Cost to purchase is high Additional fees for local advertising Percentage of sales goes to franchisor Lack of freedom in running business

Franchise ¡ Décor and You l ¡ Color Your Carpet l ¡ http: //www. coloryourcarpet. com/ Designs of the Interior l ¡ http: //www. decorandyou. com/ http: //www. franchiseopportunities. com/Zor_11195/Designs_ Of_The_Interior. htm Decorating Den l http: //www. decoratingden. com/ Modified by CMagno

Building your business plan…. . ¡ ¡ ¡ Groups of 2, decide the type of business you are going to run. l Sole Proprietorship l Partnership General l Partnership Limited l Corporation l Franchise Then, write down details about your business… Examples: name of the business, responsibilities of each owner, location, services or products, slogan, etc, just throw several ideas… More is better!!!! Write down in a piece of paper and date it When is DONE…Attach in your sketchbook. Modified by CMagno