Chapter 25

1. Chapter 25 Sole Proprietorships and Partnerships

2. What is a Sole Proprietorship? • Legal structure • Liability • Uncle Dave

3. 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

4. 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

5. Registering a Sole Proprietorship • Necessary – state and local regulations require registry • Necessary for financing • Business license

6. 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

7. Registering a Partnership • Similar steps • Additionally, partners should have a partnership agreement between themselves

8. 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

9. Laws and Regulations • Federal, state, and local laws and regulations • State tax identification number

10. 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

11. 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

12. Partnership • Advantages • Partners can pool their resources • Risks, long hours, and legal liabilities shared • Different skills and contacts brought to the business

13. 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

14. Chapter 26 Manufacturing: From Idea to Product

15. 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)

16. 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

17. Manufacturing Disadvantages • Expensive • Need for space • Costly to train and hire workers • Complexity of product

18. What and Why? • Types of manufacturers • Consumer products • Industrial products • Government contracts • Make or buy? • Manufacturing and you

19. 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

20. 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

21. Chapter 27 The Production / Distribution Chain

22. 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

23. 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

24. Chapter 28 Quality: The Source of Profit

25. 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

26. Mr. Deming Goes to Japan • The Japanese product • Study what works

27. 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

28. 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

29. 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