Select a Type of Business OwnershipSection 2

An E

xistin

g B

usin

ess

• Advantages of an Existing Business– _________ has customer

base, suppliers, and producers

– Seller of a business may ______ the new owner

– Prior ________ of revenues, expenses, and profits

– Financial Arrangement can be ______

• May give better terms than a bank

An E

xistin

g B

usin

ess

• Disadvantages of an Existing Business– Not making a

_______– Inherited

_________• Bad reputation• Poor location

– ________ is required

• Many entrepreneurs may not have the money

Fam

ily B

usin

ess

• Approx. 90% of businesses are owned by _________– Even Ford is still

held largely by family members

• Advantages of family businesses– Efforts are

___________ by those they care about

– _______ working with relatives/keep memories alive

Fam

ily B

usin

ess

• Disadvantages of Family Businesses– ___________-

hiring because of family status regardless of ability

• Can mean _______ business decisions are made

– Family ___________

Franch

ise

• Franchise- ________ agreement that gives an individual the ______ to market a company’s products or services in a particular area– ___________- the person

who purchases a franchise

– ___________- person or company who offers a franchise for purchase

– More than ___________ people own franchises

Franch

ise

• _____________ Costs of a Franchise– Initial ______________

Fee• Fee the franchise

owner pays in return for the right to run the franchise

– ____________________• Costs associated

with beginning a business

– ____________ Fees• Weekly or monthly

payments made by the owner to the seller

– Usually a % of your franchise income

– Advertising Fees• Fees paid to support

television, magazine and other __________

Franch

ise

• Advantages of a Franchise– Entrepreneur is provided with an _____________

product or service– Franchisors offer management, technical, and

other ____________– Equipment and supplies can be ____ _________– Guarantee of ______________ attracts customers

• Franchises mandates a certain level of quality

Franch

ise

• Disadvantages of a Franchise– Can cost a lot of ______ and cut down on

profits– Owners have _____ ___________ to make

decisions than other entrepreneurs– Franchisees are ___________ on the

performance of other franchises in the chain– The franchisor can ___________ the franchise

agreement

Franch

ise

• Evaluate a Franchise– What is the ___________

• Will I get _________ territory

– What are the ______ and royalty fees associated with the franchise

– How __________ have other franchises in the area been? What do other franchisees think of the franchisor?

– What ________ are provided by the franchisor

– ___________the franchise relationship

Non- ProfIt

• Focus on _________Rather than __________

• All revenue is __________ in the company

Advantages• Special _____ Exemptions•Qualify for certain _______•________ Liability

Disadvantages•______ – the time, effort, and cost to set up is lengthy•___________– for tax exemptions/grants•_________ Control

• Board of Directors

•Finances are public

Legal Fo

rm o

f Your B

usin

ess

• Sole ______________– _____ person is in

control of all business aspects

– Advantages• Gov’t exercises

_____ ________ over your actions

• Not as many _____ to fill out

– Disadvantages• Can be difficult to

raise _________• Private assets

may be _______ to pay what is owed.

Legal Fo

rm o

f Your B

usin

ess

• ________________– Go into business

with more than one person. ________ decision-making and management responsibilities

– Advantages • ____ coming up

with ________• Shared ________• Face ________ gov’t

regulations– Disadvantages

• Don’t want to share _________

• Legally _____ for errors of partners

• ________ decision making

Legal Fo

rm o

f Your B

usin

ess

• ______________- treated _____________ of its owners. The corporation, not the owners pays taxes, enters into contracts, and held liable for negligence

• Share of ______- ownership in a corporation. Owners are called shareholders. – Private vs. public

• Board of Directors- group of people who meet several times a year to make important _________ affecting the company. Electing company officers, salaries, corporate rules– Day to day operations are left up to the

_________ ___________

• Dividends- ________ distributed to shareholders by corporations.

Legal Fo

rms o

f You

r B

usin

ess

• Advantages of a Corporation

– The corporation is _____ not the individual people

– Can raise more money through ______ more stock

• Lenders may be more willing to lend

– Main shareholders can __________ without disrupting day to day operations

• Disadvantages of a Corporation

– ____________ to set up• Need a ______ and file

_______ of ____________• Must disclose all

activities of a business and will be limited to those activities alone

– Income is taxed _______• Corporation pays tax on

_________• Shareholders pay taxes

on __________

• ___ Corporation– Taxed like a partnership– Individuals are taxed on the profit they make– Good for businesses starting out as they tend

to lose money the first few years.