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Chapter 25. Sole Proprietorships and Partnerships. What is a Sole Proprietorship?. Legal structure Liability Uncle Dave. What Is a Partnership?. Consists of two or more owners who make decisions for a business together and share the profits and losses

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chapter 25

Chapter 25

Sole Proprietorships and Partnerships

what is a sole proprietorship
What is a Sole Proprietorship?
  • Legal structure
  • Liability
  • Uncle Dave
what is a partnership
What Is a Partnership?
  • Consists of two or more owners who make decisions for a business together and share the profits and losses
  • Partners bring different skills to a business
  • Be cautious – have clear agreements on:
    • Money and intellectual property
    • Ongoing responsibilities of each partner
    • The way decisions will be made
    • How profits and expenses shared
    • What happens if the business shuts down
limited partnership
Limited Partnership
  • Includes both:
    • General partners who are personally responsible and liable for the actions of the business
    • Limited partners who have a limited role or no role in managing the business and also have limited liability
registering a sole proprietorship
Registering a Sole Proprietorship
  • Necessary – state and local regulations require registry
  • Necessary for financing
  • Business license
registration steps
Registration Steps
  • Choose business name
  • Filling out a “doing business as” form with the name of the business and your name
  • An official may conduct a name search
  • After the name is established, you fill out a registration form and pay a required fee
  • May be asked to take the form to a notary
registering a partnership
Registering a Partnership
  • Similar steps
  • Additionally, partners should have a partnership agreement between themselves
permits licenses and certificates
Permits, Licenses, and Certificates
  • Permit – official document that gives you the right to carry on a specific activity
  • License – an official document that gives you the right to engage in an activity for as long as the document is valid
  • Certificate – official document that verifies something
laws and regulations
Laws and Regulations
  • Federal, state, and local laws and regulations
  • State tax identification number
sole proprietorship
Sole Proprietorship
  • Advantages
    • Relatively east to start up
    • Business owner pays personal income tax on earnings
    • Fewer government regulations
    • Make quick decisions and act without interference
    • Keeps all profits from the business
sole proprietorship cont d
Sole Proprietorship (cont’d)
  • Disadvantages
    • Difficult to raise enough money to start or expand the business
    • Must often put in long hours
    • Unlimited personal legal liability
    • No one to offer encouragement or feedback
    • Only one stakeholder – limited ability to share risk
partnership
Partnership
  • Advantages
    • Partners can pool their resources
    • Risks, long hours, and legal liabilities shared
    • Different skills and contacts brought to the business
partnership cont d
Partnership (cont’d)
  • Disadvantages
    • Profits shared
    • Each partner is liable for the actions taken by the business
    • Disagreements among the partners can destroy the business
    • Partnerships can be difficult and unpleasant to dissolve
chapter 26

Chapter 26

Manufacturing: From Idea to Product

what is manufacturing
What is Manufacturing?
  • Manufacturing
    • Make and sell products
    • Moveable assembly line
  • The manufacturing process
    • Starts with raw materials or parts and transforms them into finished products
    • Uses labor, machinery, or other tools (including manufacturing plants)
manufacturing advantages
Manufacturing Advantages
  • Can make a product that isn’t already on the market
  • Can fine-tune or add features to existing products
  • Minimize competition
    • Taking out patents on designs
    • Being big enough to cover the market better than new companies could
manufacturing disadvantages
Manufacturing Disadvantages
  • Expensive
  • Need for space
  • Costly to train and hire workers
  • Complexity of product
what and why
What and Why?
  • Types of manufacturers
    • Consumer products
    • Industrial products
    • Government contracts
  • Make or buy?
  • Manufacturing and you
job shops
Job Shops
  • Jobbers are subcontractors
    • Make parts less expensively
    • Deliver a part more quickly
    • Maintain and provide specialized equipment so larger manufacturers don’t have to purchase or maintain it
    • Offer manufacturing facilities to companies that don’t have their own
steps in development process
Steps in Development Process
  • Ideas to design
    • Drawings and specifications
    • Parts and materials lists
  • The prototype
  • Getting ready for production
    • Tooling
    • Setup costs
  • Getting help with your design
chapter 27

Chapter 27

The Production / Distribution Chain

distribution
Distribution
  • Manufacturer – wholesaler – retailer – consumer
    • Production/distribution chain
  • A slow distribution channel can hurt your business
  • Markups: prices increase at every link in the chain
    • Usually 25% to 100%
  • Percentage markups
profit margins
Profit Margins
  • The relationship between price, gross profit, and cost
    • Gross profit margin
  • Gross profit margin per unit
  • Retail price
  • Profit margin – calculated by dividing profit by sales and multiplying by 100
chapter 28

Chapter 28

Quality: The Source of Profit

quality
Quality
  • Quality – its degree of excellence
  • Profit comes from quality
  • W. Edwards Deming
    • The quality of the product was the very essence of business
    • A business that focused on quality would be more profitable than a business that focused on only lowering costs
mr deming goes to japan
Mr. Deming Goes to Japan
  • The Japanese product
  • Study what works
why quality is actually cheaper
Why Quality is Actually Cheaper
  • Don’t have to fix it
  • Most valuable advertising possible
  • You earn customer loyalty
  • Continuous involvement (Kaizen)

Start with quality

quality relationships
Quality Relationships
  • Treat suppliers and employees well
    • Suppliers won’t be loyal to a company that deals with them unfairly
    • Employees won’t focus on continuous improvement unless they feel good about their company
10 ways to improve quality
10 Ways to Improve Quality
  • Adopt a philosophy of continuous improvement
  • Be consistent
  • Do it right the first time
  • Develop long-term relationships with suppliers based on loyalty and trust even if it means not getting the lowest price every time
  • Focus on quality in production for yourself and your employees
  • Eliminate fear
  • Don’t ask for perfect performance from your employees or yourself – instead work smarter and better every day
  • Focus on the quality of what your business does, not the quantity
  • Quality is everyone’s job