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Business Formation: Choosing the Form that Fits

Business Ownership Options: The Big Four. Sole Proprietorship the business is owned by a single individualPartnership two or more people serve as co-owners of the businessCorporation the business is a separate legal entityLimited Liability Company a hybrid with characteristics of both

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Business Formation: Choosing the Form that Fits

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    1. Business Formation: Choosing the Form that Fits What are the four basic forms of business and their characteristics? What are the advantages and disadvantages of a sole proprietorship? What are the pros and cons of partnerships? Why have corporations become the dominant form of business ownership? Why are limited liability companies becoming increasingly popular? What are the advantages and disadvantages of franchising?

    2. Business Ownership Options: The Big Four Sole Proprietorship – the business is owned by a single individual Partnership – two or more people serve as co-owners of the business Corporation – the business is a separate legal entity Limited Liability Company – a hybrid with characteristics of both a corporation and partnership 2

    3. Business Ownership Options: The Big Four 3

    4. Advantages and Disadvantages of Sole Proprietorships 4

    5. Partnerships: Two Heads (and Bankrolls) Can Be Better Than One 5

    6. Partnerships: General vs. Limited 6

    7. Partnerships: Two Heads (and Bankrolls) Can Be Better Than One 7

    8. Keeping It All in The Family: Family Limited Partnerships (FLIPS) 8

    9. Corporations: The Advantages and Disadvantages of Being an Artificial Person 9 Discuss the term C Corporation.Discuss the term C Corporation.

    10. Corporations: The Advantages and Disadvantages of Being an Artificial Person 10

    11. Corporations: The Role of Board of Directors 11 Oversee the operation of corporation and protect investors’ interest Establish mission and set objectives Rarely get involved in day-to-day management Responsible for monitoring the performance of the corporate officers Click the link to view the board of directors of Dell Computers. The company lists the committees that they are apart of.Click the link to view the board of directors of Dell Computers. The company lists the committees that they are apart of.

    12. Other Types of Corporations: Same but Different 12

    13. This TARP Has Executive Pay Covered CEO pay of 12 major corporations totaled $1.26 billion while the firms lost $330 billion in shareholder value Executive pay issues have been amplified as the economy spirals into recession Government bailout (TARP) limits CEO compensation Board of Directors are supposed to protect the interest of stockholders But many of the CEOs have clauses that provide lucrative severance pay regardless of performance 13 Discuss the automobile firms flying to DC in separate jets.Discuss the automobile firms flying to DC in separate jets.

    14. Corporations: Characteristics 14 Possibly replace with exhibit 6.3. Recreated for last edition due to size.Possibly replace with exhibit 6.3. Recreated for last edition due to size.

    15. Corporate Restructuring: Mergers & Acquisitions 15

    16. Types of Mergers & Acquisitions 16 Possibly replace with exhibit 6.4. Recreated for last edition.Possibly replace with exhibit 6.4. Recreated for last edition.

    17. Divestitures: When Less is More Divestitures allow the firm to streamline their operations and focus Spin-off – setting up the division or part of the business as a separate company Sell stock to existing stockholders Carve-out – setting up a separate business from an operation Sell stock to outside investors 17

    18. Breakin’ Up Is Hard to Do—Even in the Corporate World 18

    19. The Limited Liability Company: The New Kid on the Block 19

    20. Franchising: Proven Methods for a Price 20 Note that many McDonalds are not franchises but corporate owned. Click the link to see the Franchise Section of the Entrepreneur Magazine/website Franchise section. Review the top franchises and the section on becoming a franchisor. Note that many McDonalds are not franchises but corporate owned. Click the link to see the Franchise Section of the Entrepreneur Magazine/website Franchise section. Review the top franchises and the section on becoming a franchisor.

    21. Franchising: Proven Methods for a Price 21 Click to link to highlight more about Ben and Jerry’s PartnerShops. Click to link to highlight more about Ben and Jerry’s PartnerShops.

    22. Some Franchisees Are Quite Happy When They Don’t Earn Profit 22 Many customers like doing business with nonprofit franchisees. Nonprofit franchising is a good way for companies to be socially responsible and build goodwill. Nonprofits can boost their fundraising efforts. Reference the Ben & Jerry’s example.Reference the Ben & Jerry’s example.

    23. Franchising in Today’s Economy Franchising has been expanding into foreign markets. McDonald’s has slightly more franchises abroad than in the U.S. The number of women franchisees and franchisors is growing. Minority participation in franchising is low. The International Franchising Association has launched an initiative to recruit minority franchisees. 23 Successful women franchisors Coffee Beanery, Build-A-Bear and Liberty fitness are all successful women owned franchises.Successful women franchisors Coffee Beanery, Build-A-Bear and Liberty fitness are all successful women owned franchises.

    24. Franchising in Today’s Economy 24

    25. Entering Into A Franchise Agreement Know all the facts before signing the dotted line Franchisors must provide a Franchise Disclosure Document (FDD) The Federal Trace Commission (FTC) require: The FDD Must be written in plain English The franchisor must be give 14 days to review the FDD The Franchisee should have a lawyer review the document 25

    26. Looking Back What are the four basic forms of business and their characteristics? What are the advantages and disadvantages of a sole proprietorship? What are the pros and cons of partnerships? Why have corporations become the dominant form of business ownership? Why are limited liability companies becoming increasingly popular? What are the advantages and disadvantages of franchising?

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