Transcript Ch4 PowerPoint

Chapter 4
SELECT A TYPE
OF OWNERSHIP
LESSONS
4.1 Run an Existing Business
4.2 Own a Franchise or Start a
Business
4.3 Choose the Legal Form of Your
Business
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Chapter 4
Slide 2
Lesson 4.1
RUN AN EXISTING BUSINESS
GOALS
 Identify the advantages and
disadvantages of purchasing an
existing business.
 Explain the steps involved in
buying a business.
 Recognize the advantages and
disadvantages of joining a
family business.
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ADVANTAGES OF BUYING
AN EXISTING BUSINESS
Chapter 4
Slide 3
The existing business already has
customers, suppliers, and procedures.
The seller of a business may train a
new owner.
There are prior records of revenues,
expenses, and profits.
Financial arrangements can be easier.
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DISADVANTAGES OF BUYING
AN EXISTING BUSINESS
Chapter 4
Slide 4
Many businesses are for sale because
they are not making a profit.
Serious problems may be inherited.
Capital is required.
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Chapter 4
Slide 5
STEPS TO PURCHASE A BUSINESS
 Write specific objectives about the kind of business you want
to buy, and identify businesses for sale that meet your
objectives.
 Meet with business sellers or brokers to investigate specific
opportunities.
 Visit during business hours to observe the company in
action.
 Ask the owner to provide you with a complete financial
accounting of operations for at least the past three years.
 Ask for important information in written form.
 Determine how you would finance the business.
 Get expert help to determine a price to offer for the business
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Chapter 4
Slide 6
ENTER A FAMILY BUSINESS
Advantages of a family business
Disadvantages of a family business
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Chapter 4
Slide 7
Lesson 4.2
OWN A FRANCHISE
OR START A BUSINESS
GOALS
Evaluate franchise
ownership.
Recognize the advantages
and disadvantages of
starting a new business.
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Chapter 4
Slide 8
FRANCHISE OWNERSHIP
A franchise is a legal agreement that
gives an individual the right to market a
company’s products or services in a
particular area.
A franchisee is the person who
purchases a franchise agreement.
A franchisor is the person or company
that offers a franchise for purchase.
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Chapter 4
Slide 9
OPERATING COSTS OF A FRANCHISE
Initial franchise fee
Start-up costs
Royalty fees
Advertising fees
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ADVANTAGES
OF OWNING A FRANCHISE
Chapter 4
Slide 10
An entrepreneur is provided with an
established product or service.
Franchisors offer management,
technical, and other assistance.
Equipment and supplies can be less
expensive.
A guarantee of consistency attracts
customers.
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DISADVANTAGES
OF OWNING A FRANCHISE
Chapter 4
Slide 11
 Franchises can cost a lot of money and cut
down on profits.
 Owners of franchises have less freedom to
make decisions than other entrepreneurs.
 Franchisees are dependent on the
performance of other franchisees in the
chain.
 The franchisor can terminate the franchise
agreement.
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Chapter 4
Slide 12
EVALUATING A FRANCHISE
 Demand for product or service
 Exclusive territory
 Costs
 Profitability
 Longevity
 Services provided by franchisor
 Loss of independence
 Cancellation
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Chapter 4
Slide 13
STARTING YOUR OWN BUSINESS
Advantages of starting your own
business
Disadvantages of starting your own
business
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Chapter 4
Slide 14
Lesson 4.3
CHOOSE THE LEGAL FORM
OF YOUR BUSINESS
GOALS
Evaluate the different legal
forms for a business.
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TYPES OF BUSINESS
ARRANGEMENTS
Chapter 4
Slide 15
Sole proprietorship
Partnership
Corporation
S corporation
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Chapter 4
Slide 16
SOLE PROPRIETORSHIP
A business that is owned exclusively by
one person is a sole proprietorship.
Sole proprietorship is the most common
form of ownership in the United States.
Disadvantages
Investment
Risk
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Chapter 4
Slide 17
PARTNERSHIP
Shared decisions
Shared investment
Shared risk
Disadvantages
Partnership agreement
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Chapter 4
Slide 18
CORPORATION
Share of stock
Board of directors
Dividends
Disadvantages
Why incorporate?
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Chapter 4
Slide 19
S CORPORATION
An S corporation is a corporation
organized under subchapter S of the
Internal Revenue Code whose income
is taxed as a partnership.
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CHARACTERISTICS OF
THE LEGAL FORMS OF
BUSINESS
Chapter 4
Slide 20
FEATURE
Simple to start
Decisions made by one person
Low initial cost
Limited liability
Limited government regulation
Ability to raise capital
Double taxation of profits
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