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Forms of buiness ownership
- 1. Basic Forms of Business Ownership • Sole Proprietorship • Partnership • Corporation Source: US Internal Revenue Service
- 2. Basic Forms of Business Ownership Source: US Internal Revenue Service Type of Ownership Number Sales Sole Proprietorship 72% 6% Partnership 8% 13% Corporation 20% 81%
- 3. Sole Proprietorship • Ease of start/end • Be your own boss • Pride of ownership • Leave a legacy • Retain profit • No special taxes • Unlimited liability • Limited financial resources • Management difficulty • Time commitment • Few fringe benefits • Limited growth • Limited life span AdvantagesAdvantages DisadvantagesDisadvantages
- 5. PartnershipPartnership • More financialMore financial resourcesresources • SharedShared managementmanagement • Longer survivalLonger survival • No SpecialNo Special TaxesTaxes • Unlimited liabilityUnlimited liability • Division of profitsDivision of profits • DisagreementsDisagreements among partnersamong partners • Difficult toDifficult to terminateterminate AdvantagesAdvantages DisadvantagesDisadvantages
- 6. Corporations • Private: Not Traded on Any Stock Exchange • Public: Shares are Traded on One or More Stock Exchanges • Non-Profit: Performs Public Service, Has Special Tax Considerations to Encourage Formation
- 7. CorporationCorporation • Limited liabilityLimited liability • More money forMore money for investmentinvestment • SizeSize • Perpetual lifePerpetual life • Ease of ownershipEase of ownership changechange • Ease of drawingEase of drawing talented employeestalented employees • Separation ofSeparation of ownership/mgmt.ownership/mgmt. • Extensive paperworkExtensive paperwork • Double taxationDouble taxation • Two tax returnsTwo tax returns • SizeSize • Termination difficultTermination difficult • Conflict withConflict with Stockholder &Stockholder & BoardBoard • Initial costInitial cost AdvantagesAdvantages DisadvantagesDisadvantages
- 8. World’s Largest Corporations 1. Citigroup 2. General Electric 3. American Intl Group 4. Bank of America 5. HSBC Group 6. ExxonMobil 7. Royal Dutch/Shell 8. BP 9. ING Group 10. Toyota Motor 11.UBS 12.Wal-Mart Stores 13.Royal Bank of Scotland 14.JP Morgan Chase 15.Berkshire Hathaway 16.BNP Paribas 17.IBM 18.Total 18.Verizon Communication 20.Chevron Texaco Source: Forbes, 2005
- 9. America’s Largest Private Companies 1. Cargill / agricultural commodities, food $66,669 2. Koch Industries / chemicals, energy, tech 60,000 3. Mars / candy, pet food electronics 19,100 4. PricewaterhouseCoopers / accounting 18,700 5. Publix Supermarket / supermarkets 18,686 Revenue 2004Revenue 2004 (In Millions)(In Millions) Source: Forbes, 2005
- 10. America’s Oldest Companies Company Year Started Type of Company J. E. Rhoads & Sons 1702 Conveyer Belts Covenant Life Ins. 1717 Insurance Philadelphia 1752 Insurance Contributorship Dexter 1767 Adhesives & Coatings D. Landreth Seed 1784 Seeds Bank of New York 1784 Banking
- 11. GM’s Ownership In: Source: USA TODAY
- 12. How Owners AffectHow Owners Affect ManagementManagement
- 14. 5-14 Franchise System • Franchise Agreement • Franchisor • Franchisee
- 15. 5-15 Franchise Contract Franchisor, Inc.Franchisor, Inc. FranchiseeFranchisee BrandedBranded Product/ServiceProduct/Service PerformancePerformance MonitoringMonitoring $$$$$$$$$$
- 16. 5-16 Franchisor • Assigns Territory • May Provide Financial Aid/Advice • Offers Merchandise/ Supplies at Competitive Price • Provides Training/Support • Business Expansion Using O.P.M.
- 17. 5-17 Franchisee • Pays Up-Front Costs • Makes Monthly Payment to Franchisor • Runs Business by Franchisor’s Rules/Procedures • Buys Materials from Franchisor/ Approved Supplier
- 18. 5-18 Franchises • Management &Management & marketing assistancemarketing assistance • Personal ownershipPersonal ownership • Recognized nameRecognized name • Financial advice &Financial advice & assistanceassistance • Lower failure rateLower failure rate • High start-up costsHigh start-up costs • Shared ProfitShared Profit • Management regulationManagement regulation • Coattail effectsCoattail effects • Restrictions on sellingRestrictions on selling • Fraudulent franchisorsFraudulent franchisors AdvantagesAdvantages DisadvantagesDisadvantages
- 19. 5-19 Cost of Fast-Food Franchise CompanyCompany Initial FeeInitial Fee RoyaltyRoyalty Burger KingBurger King $50,000$50,000 8.5%8.5% McDonald’sMcDonald’s $45,000$45,000 8%8% Wendy’sWendy’s $25,000$25,000 8%8% Domino’sDomino’s NoneNone 8.5%8.5% SubwaySubway $10,000$10,000 11.5%11.5% Krispy KremeKrispy Kreme $40,000$40,000 5.5%5.5%
Notes de l'éditeur
- Also available on a Transparency Acetate See Learning Goal 1: Compare the advantages and disadvantages of sole proprietorships. See text pages: 118 See Learning Goal 2: Describe the differences between general limited partners, and compare the advantages and disadvantages of partnerships. See text pages: 121-124 See Learning Goal 3: Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, ad limited liability companies. See text pages: 124-131 Basic Forms of Ownership The rule of 80-20 applies to the forms of businesses as well. Although corporations make up only 20 percent of the total number of businesses, they generate about 81% of sales in the U.S. Ask the students, how many are interested in starting their own business? What form of ownership do they believe would they be starting their business with? (Many students may dream of having their own business but may not have thought through the process and what it takes to start a business. Majority should indicate that it would be a sole proprietorship. Some may suggest a partnership.)
- Also available on a Transparency Acetate See Learning Goal 1: Compare the advantages and disadvantages of sole proprietorships. See text pages: 118 See Learning Goal 2: Describe the differences between general limited partners, and compare the advantages and disadvantages of partnerships. See text pages: 121-124 See Learning Goal 3: Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, ad limited liability companies. See text pages: 124-131 Basic Forms of Ownership The rule of 80-20 applies to the forms of businesses as well. Although corporations make up only 20 percent of the total number of businesses, they generate about 81% of sales in the U.S. Ask the students, how many are interested in starting their own business? What form of ownership do they believe would they be starting their business with? (Many students may dream of having their own business but may not have thought through the process and what it takes to start a business. Majority should indicate that it would be a sole proprietorship. Some may suggest a partnership.)
- Also available on a Transparency Acetate See Learning Goal 1: Compare the advantages and disadvantages of sole proprietorships. See text pages: 119-120 Sole Proprietorship This slide identifies the advantages and disadvantages of a Sole Proprietorship form of business. Special emphasis should be given to the disadvantage of unlimited liability (Personal assets at risk), and to the time commitment (24 hours, 7 days per week, and 365 days per year). Special Note: It’s estimated that Small Business owners create 80% of new employment in this country; a major component of economic growth.
- Also available on a Transparency Acetate See Learning Goal 2: Describe the differences between general limited partners, and compare the advantages and disadvantages of partnerships. See text page: 121 Types of Partnership This slide presents basic types of partnerships: general and limited. In general partnership, all owners share in operating the business and assuming liability. A limited partnership: one or more general partner (unlimited liability and active in managing the firm) and one or more limited partner (invests money but no management responsibility and liability limited to the investment amount).
- Also available on a Transparency Acetate See Learning Goal 2: Describe the differences between general limited partners, and compare the advantages and disadvantages of partnerships. See text pages: 122-123 Partnership Partnerships as with all forms of ownership have advantages and disadvantages; so each member must choose carefully. Suggestions to discuss with students regarding partnerships: Partnership agreements must be in writing! Each individual’s responsibilities to the company must be in writing and included as part of the contract. Make certain that provisions are in place if one or more partners want to terminate the agreement. (Information outlining the terms and conditions of terminating any agreement, should be outlined in the original contract.) Do not add a partner unless that individual brings unique skills that add value to the business.
- See Learning Goal 3: Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. See text pages: 124-131
- Also available on a Transparency Acetate See Learning Goal 3: Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. See text pages: 125-128 Corporation Identify the major advantage of corporate ownership is the limited liability protection. (Personal assets are protected) Interesting facts regarding incorporating a business: The cost for a business to Incorporate ranges from $100-$310, plus states fees. (This only includes the legal filing expenses) Connecticut has the highest state fees at $380, the state of Oregon has the lowest fees at $20. 3. Over half of the Fortune 500 companies choose to incorporate in Delaware for the following reasons: The cost to incorporate in Delaware is one of the lowest in the country ($89). There is no corporate income tax. Delaware maintains a separate corporate law court system, that does not use juries, but only use judges appointed for their knowledge of corporate laws.
- Also available on a Transparency Acetate See Learning Goal 3: Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. World’s Largest Corporations This slide presents Forbes’ 2005 top 20 global corporations. Ask the students: How many of these top 20 are U.S. corporations? (11 out of 20) Ask the students: What is the home country of the rest of them? (Two are from France, two from the Netherlands, one from Japan, one from Switzerland, and rest are from U.K.)
- Also available on a Transparency Acetate See Learning Goal 3: Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Largest Private Companies This slide presents America’s top 5 private companies in 2005. Ranked 6-10 were: Bechtel, Ernst & Young, C&S Wholesale Grocers, SEMGroup, and Meijer. Ask the students to debate why a company may want to remain private? (Some of the reasons may be control, privacy, no external pressure, and preference.)
- Also available on a Transparency Acetate See Learning Goal 3: Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. America’s Oldest Companies Interesting slide that identifies those companies that have been in business for over 200 years. A few facts you may wish to address with the students: JE Rhoads, is the oldest company in the U.S. and started off tanning leather for Buggy Whips. Philadelphia Contributorship Insurance, was formed based on a suggestion by Benjamin Franklin regarding the establishment of a volunteer fire brigade, which eventually developed into an insurance company. The Bank of New York, New York’s first bank, was opened for business in Lower Manhattan on June 9th, 1784, only a few months after the departure of British Troops from American soil. Environment changes in the business world will always happen; those companies who embrace change and provide quality goods and services, will continue to profit. Discuss with the students the significant amount of commitment a company must be prepared to do to stay in business. (Some areas that must continually be addressed are changes in societal culture, competition, economy, laws/politics, and technology changes.)
- See Learning Goal 3: Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. GM’s Ownership In 1. General Motors Corporation (GM) designs and makes automobiles, trucks, locomotives, and related parts; and also offers Financial Services. 2. Fiat S.P.A., which GM has ownership of 20%, is the 6th largest automaker by sales in the world. 3. GM’s Automotive business segments consist of four regions: GM North America GM Europe Gm Latin America/Africa/Mid East GM Asian Pacific 4. Ask the students: Why does GM invest in so many different foreign auto manufacturers? (Purpose is to expand globally. The risk and cost associated with purchasing ownership in an existing brand is much lower than developing a new brand.)
- Also available on a Transparency Acetate See Learning Goal 3: Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. See text pages: 124-131 How Owners Affect Management This acetate provides students with a visual example of how corporations are structured. Please note the importance of Stockholders as the owners of the company. Students should realize that the Board of Directors does not engage in daily operations, but rather they “oversee” the company’s operations. Board of Directors are responsible for the following: Set objectives Select Senior Executive Influence the company’s long-term strategic planning. Compensation for Board Members typically consist of an annual salary, plus expenses and additional compensations outlined in their contracts. (An example of compensation may be a $35,000 salary, plus $5,000 for every board meeting attended.)
- Also available on a Transparency Acetate See Learning Goal 4: Define and give examples of three types of corporate mergers, and explain the role of leveraged buyouts and taking a firm private. See text pages: 133 Types of Mergers This slide presents the three types of mergers. Horizontal merger takes place in the same industry, i.e., one competitor merging with another. An example of this would be Daimler Mercedes Benz merging with Chrysler to create DaimlerChrysler. Vertical merger takes place between companies in a value chain, for example a supplier and a distributor merging. Conglomerate merger has no relationship between companies.
- See Learning Goal 5: Outline the advantages and the disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. See text pages: 134-141
- See Learning Goal 5: Outline the advantages and the disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. See text pages: 134-141
- See Learning Goal 5: Outline the advantages and the disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. See text pages: 134-141
- See Learning Goal 5: Outline the advantages and the disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. See text pages: 134-141
- Also available on a Transparency Acetate See Learning Goal 5: Outline the advantages and the disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. See text pages: 135-137 Franchises This slide presents the advantages and disadvantages of franchising. Primary advantages are name, assistance, and lower failure rate. Primary disadvantages are high costs, shared profits, and restrictions.
- See Learning Goal 5: Outline the advantages and the disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. Cost of Fast-Food Franchise 1. This slide shows the initial purchase fee and the percentage of gross revenues charge to franchisers to operate. 2. Additional costs of startup include the following capital requirements: Royalty fees are traditionally based on gross sales minus sales tax. Advertising fees as high as 3.5% of sales Location acquisition Equipment ($40-$65,000) Leasehold Improvements ($20-$80,000) POS System (Point-of-Sale); minimum $4,500 Outside Signs ($3,500-$9,000) Opening Inventory ($3,000-$9,000)