Sth = laa DLOLLC IByears ol comparison site, LockingforBookingcom. This At the time of his webste launch, site enables consumers to. compare the telecom industry was booming all hotels n the Netheriands with and Ben had to work hard to Getting to Know ‘over 30,000 hotels elsewhere keep his site up to date as tarlffs changed overnight. A few months later he set up a innovating sit. His company sole proprietorship, with his launched a tool that allowed mother as the official director. telecom customers to upload AMtera whl his site was one of the thelr phone bil and automatically most visited websites in the Ni receive talored advice from Bencom. Ben expanded his busi During the first year the tool was used over 50,000 phone call tariff overview times, At the moment, he employs 20 people at of caling from 13 popular ination. three different offices. His team takes care of the His company grew rapidly and Ben became the websites, which are visited by more than 30,000 #youngestintemnetmilionaire ofthe Netherlands sits 2 day. jh 2000 the legal structure changed into a ust like Ben, all business owners must Limited Liblity Company with the folowing ‘decide which form of business is best fr them. mmisslon:*To provide consumers, rstitutions ‘Whether you dream of stating a business ‘and companies insight in several complex for yoursel, going into business with 2 In Europe. Ben did not lose his by 2 ing 2 comparison markets by offering objective and accur- ‘partner, forming a corporation, or someday ate price and product comparisons.” being a leading franchisog, it's important to ‘Ben kept on adding new functions to ‘know that each form of ownership has its his websites and the number of visitors: ‘advantages and. disadvantages. You will continued ta grow. He aso expanded Nis learn about them al inthis chapter business to cater forthe Bellan market. ‘his meant that he had to change his Secs Rete re ‘French Enuepeneus Buses .Noverber set no ech ad ad at Pte eeeces oe {online}, avalabie at: wewbencom.ni/over_bencom. ling changes aspen) acessed January 28, 2002 Opening et market a | pre was writen by Jean Pere vo der Rest and Helped by thbusiness year! Chant someone who has, J How you form your busine Jong-term success. The th oprietorships, (2 oprictorships and p P ercentage of BusinessesStates make up only 20 percent of all businesses, but they earn 81 percent total US, business receipts (see Figure 5.1) Keep in mind that just because a business starts in one form of 0 ship, it doesn't have to stay in that form.? Many companies st form, then add (or drop) a p. Dr two, and eventually become corporal ted liability companies, or franchisors.’ Let’ begin our discussion # the most basic form of ownership—the sole proprietorship. tearninc gOal 1 Compare the advantages and disadvantages of sole propriete SOLE PROPRIETORSHIPS Advantages of Sole Proprietorship: Sole proprietorships are the your quest for an interesting career. Every town and talk with about the joys a ess on their own.4 Most will menti their own boss and setting their own include: 1. Ease of starting and ending d a sole proprietorship is bu saw, a laptop, a tractor, a some announcements business. You may have license from the local that is no problem. Iti one to consult or d decisions. Being your o1ence to save enougt When you own yo e. You have fos ed nthe a company te 969 if it means selling. ee isa serious risk, and ana discussion with a mpeiness nchtog others. comet seed 2, ‘Limited financial on cone to what the one of motyte ven the how much money on time comes gro have a greater prob Ifyou were a sole start and equip a bus a ee 3. Management diffie sind fag vee must keep invent ae a selling thi records. Sole p employees to hel with the salary and 4. Ovenvhelming time @ their own hours, its and have time for a to share the burden, eae hours a day at least a nonsupervisory commitment a The responsbilty of 6 5. Few fringe benef benefits that often @ health insurance, no sick leave, and no va ‘0 30 percent or more of awa Limited growth. Expansion is of on its owner for most of its crea 7 Limited tfe span. 1 the sole PI b the business no longer exists (un Proprietor’ heirs) Talk with a few local rohan, ate un, Thay are ta are likely to Problems getting loans fron, the bank, py Ply keeping up with the Th €lors choose I sole proprieto busin ‘0 find partners setearninc ZOal 2 Describe the differences between, Beneral and limit Ospgare te asvanages ane ceasing, es PARTNERSHIPS partnership is a legal form of business sper types: (1) general partnerskipas(O) lealed camer Sing the business and in assuming liability forthe business’ partnership has one or more general partners and one or mo ners. A general partner is an owner (partner) who has nd is active in managing the firm. Every partnership must general partner, A limited partner is an owner who i fosiness but does not have any management resp Jpeses beyond his or her investment. Limited ited partners’ liability for the debts of the busine they put into the company; their personal assets One form of partnership, the master limited much like a corporation (which we discuss next) in th tion and is traded on the stock exchanges like a co partnership and thus avoids the corporate i Partnerships are normally found in the oil and g Sunoco Inc. formed the MLP Sunoco Logisties own, and operate a group of crude oil and refine tue facilities, Income received by SXL is not ta investors as dividends as it would be if SXL were @ ‘Another type of partnership was created to Ti unlimited liability. A limited liability partnership oflosing their personal assets to the outcomes of sions and those of people under their supervision. I ‘nan LLP, you can operate without the fear that 0 commit an act of malpractice resulting in a judg house, car, retirement plan, even your collection figures, as would be the case in a general partnel this personal protection does not extend to & Joans, leases, and business debt the partnership. assets is stil liability protections for LLPs, the cussed later in the chapter) All states except Louisiana have 2 (UPA) to replacegeneral pal 43) dl nis of any & ind losses, ad he thrve key elem shared prof operations oft Advantages of Partner: hh easier 10 OWP ner may be s! dling or serv icin expertise as Wel ight on Sma Often, it is mu partners, Your pa while you do the sel money, support, and ‘on vacation. The Spot choosing a partner Partnerships usual ly have the fol 1. More financial res and credit, itis easi t at part ensole propriet@spOTLIGHT ON SMALL questions to Ask Your Partner , pefore plunging into a partnership, ask yourself some . tions regarding your potential partner, Dayedisnatehns same goas? Do yOu share the same vision for the companys ‘ature? What sils does the person have? Are those skis the same a8 YOU'S, oF do they complement your skis? What con. tacts, resus, O special attbutes wl the person brig to the business? What type of decision maker isthe persons i this someone with whom you could happily share. tor all major business decisions? Do you trust each other? How does the person respond to adversity? Does he or she try to sove the problem or try to defend hs or her ego? Can Disadvantages of Partnerships Anytime two people must agree, conflict and tension are p have caused splits between relatives, friends, and spot disadvantages of partnership: 1. Unlimited liability. Each gen firm, no matter who was te for your partners’ mis rneral partners can) own if the busines Division of profit cause conflict partnership, fone part7-The dates ofeach pat 8. The salaries and craw 12, Any special 13, Provision for:Now oformatusiness © CHAPTERS tearninc ZOal 3 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations Secxperotons, and fined tablty companies, ; CORPORATIONS Many corporations—like Electric, _ Microsof Manart—ae bind ont sultatially tothe : jowever, itS not necessary to be big to incorporate A conventional (C) corporation is a state-chartered le with authority to act and have liability separate from its Srockholders. Stockholders are not liable for the debte {the corporation beyond the money they invest inv shares, or stock, in the company. They don't han heir house, icant bonclt A corpenatente only often enables many people to share i ness without working ther may choose whether to offer ow sately held. (We discuss sto describes various types of ¢Jons when read ropa ere 55 ve contvsng 9008 6 x You may find some cone sed coaronarervnes— eaewotte ber mone caregso. An oben corporation Soe ey 1od States but Is joes business A domestic corporation & pregncrpro dest IS soca cn sone whose stock is held by a cones genet) corpora a one cee ger professontcaroreton is oe whose one’s ft a Share ia in professional corpore ‘one state but is chart red in Delaware DeGe yn corporation mi ness tre charte ‘A forelr ‘An open (pubic corpor ‘BesonMobi are examples factories quipment. They can They can buy other business risks. In Ship change. It is easy Hl that is Necessary is to self g talented employees, Coy Hering such benefits as corporation for aSeno (slect board of directors) Cor es Ceres) Cieen Covers object ‘ions ips and partner tages to incorporating. O w of the disadvantage The paperwork needed to sole proprietor or partner cords. A corporation, im ‘many firms business-oriented laws fied public acesorting smal Hficers, entrepreneuy Of the very compam of the founders iy businesspeople are: ES Corporations must Incorporation outwel RPotations are large Ms of stockholdre ment re crt iene steno aae af Kommonccmaytaname Rtn ne TERS oaks «The corporation's name. ont the pee. mace Its purposes. Its duration (usually perpetual), ‘The number of shares that can be tssued, their voting rights, and any other rights the shareholders have. ‘The corporation's om the date of applicat ie government creation oprietorships and partner governing them are in Sul c.) The paperwork and det onventional (C) corporation nd employees, and the benefit as the personal income n of C corporations. rcent of incomepanty @ bosnessersMh ring 50 roan that Ose iss) Meas struct’ O19 ius ob v-shortcoruine yonces Wil An Sco Jeast five years T For one thing, the bet to Kear all the benefits Rhantages and lability lifer panie: Limited Liability Com A limited liability company (LLC) iss etal eigibiity requirementegd Toy) end were recognized by the Ink federal income tax purposes it 19883 recognized LLCs. fi ‘of LLCs has risen G8 fewer than 100 filings to operate th reisratonsn some ts are LL ‘anew type of LLC, a virtual compan Why the drive toward at u Limited liability, Personal a Bre sly available only 10) corporations. Choice of taxation. LLCs can ¢ uted in propo roportion LLC membersLEGAL briefcase virtual Companies one of the benefits of cloud cor mers tat DUshesses andthe nga eet eects ta come together ina physical place in order ng ore have Companies can use virtual press rooms to ae work together. emplcy ital teams, oF enjoy the benefte erasers PES Most companies, however, are stil required by rete ysical office and a management team, and to law to have a paper trail of all transactions. That may soo to keep a physical Through a new form of LLC - caieg surgeon the state of Vermont in the USA has been tre ay = worid to legally allow a company to exist ome se the documents required to register this sae joni ny using any mong comps They ean clectronically, company meetings can be held of online communication, and relationships a members can be established electronically members owning 2 perce there's no stock, they can employees. Taxes. LLC members must p Social Security taxes pai their profi owners’ salaries but no Paperwork. While the that required of c proprietors. The start-up cost fo Zoom (www.legalzoom $150, Figure 5.6 on Pp. the major forms ofDocuments None may ones PENS wedeate Start perm o scene ageerent Ramen cor written st pay debts. Terminates on the Terminates on ‘Seath of owner the death or witharawal of partner Business can be Must 0d to qualified buyertearninc gOal 4 Define and give examples of three types of cor es of corporate mergers, and @ the ole of leveraged buyouts and taking atm pewat ne CORPORATE EXPANSIO: MERGERS AND ACQUISITIONS The merger mania of the late 1990s reached its peak in 2000, when seusoumerersandaustons hia suing lon Nopitcone below Mostot theme aah eget within their own fields to save costs, enter new market competition, or adapt to changing technologies or ° be unattainable goals for many of the merged giants late 1990s failed to meet their goals. By 2009, the bleak US. olume of mergers and acquisitions to plummet 86 pet renewed optimism as mergers increased 14 percent !* What’ the difference between mergers and acquis result of two firms joining to form one company. It iy \wo individuals as one family. An acquisition is 0 the property and obligations of another co than entering a marriage. There are three major types of corpor: conglomerate. A vertical merger joins two. of related businesses. A merger between a soft: sweetener maker would ensure the merged fi dient the soft drink manufacturer needs. It trol of the soft drink company’s product A horizontal merger joins two them to diversify or expand their prod eral water company that merge can m A conglomerate merger unite: in order to diversify business opet pany and a snack food company’ on p. 132 illustrates the differen Rather than merge or sell to maintain, or in some cast firm private, management or ers obtain all the firm's buying it back from. they may lose thei could. improve owned thesmanagers, maker Roche paid . Belgium's InBey Budweiser and Bud Vantage, Ichising anTHINKING green play Ball but Play Green Many people think the ony type of tanehisesy enetel or restaurons ranching eee YU a by Football League and Major League Baseball we teksten ‘and they are thinking green, ame! Thenew home forthe Nationals basebal team n and Environmental Design (LEED) rating from the Us noe Buacing Counci. On its opening day in 2008, tang mag ey ed Siiary, few know that the low-flow tog milion of gallons of water each season, and erat water system screens out organic debris such oo and ht dog ts. The park’ recycling center isso tohandle glass, metal, and plastic recyclables a three-game home stand, But, the Natio When the New York Mets bull with the US Environmental Pro their new ballpark using practices. The Regional Mets deserved an en to reduce theig economy." The 3 food and fulls s, the largest § often considered theMerry Molds is the fargest home cleanin ronchise mtne 8 8 leans over 300,000 uses, apartments 27d condos a month The fronchise fee ve wight 2y training program followed by in-depth ‘teraction with the hise develoome, f©0m and assistay from an estobiig Toa care 2011 tig fra Magazine's hhises included 19 40 mitt os toxlay and projection the next 20 years, 4 chise system. Advantages of Franchises Fr global bu that are priced. 1 example, McDonald’ sends all new franchisi anchising bas is penet ued every aspect sainess life by offering products gp ible, convenient, anchising clearly has some fanagement and marketi Compered -with, someon alll business from scratch, a has a much greater chance 9 because he or she has an established product to sell, hel location, and assistance in all phases of promotion and g like having your own store but with full-time consul need them. Franchisors usually provide intensive ees and Hamburger University in Oak Brook, Ilinois.23 Some franchisors help their franchisees with local wing them depend ae athe maid service busing with their franchise fee yy ote! ice UP to 80 percent financial assistance Lower failure rat Fi 7 10 Bromising franchisees, rate, Historically, the lower than that of other ne ai rown so rapidly that 1 ventures, you need to be ca We for franchises has been Disadvantages of Franchises gre are, however, some potential pitfa There a Th eet htial pitfalls to franchising. Check out any f chise arrangement with present franchisees and discuss the tice cot all -y and an accountant. Dis vantages of franchises include the following: inchise. Start-up costs for a Jazzercise See but i its Dunkin Donuts you afer youd hence Naa dough—approximately $2 million 2! Shared profit. The franchisor ofte profits in addition to the start. based on sales, not profit. This s1 a franchisor demands a 10 percent royalty on a franchise's net cents of every dollar the franchisee collects (before taxes a expenses) must be paid to the franchisor. Management regulation. Management “assistance” becoming managerial orders, directives, and limitaté feeling burdened by the company’s rules and 1 drive to run their own business. Often franchi to resolve their grievances with franchisors battles alone. For example, in 2010 the Advertising Cooperative, which represents KFC to gain control of advertising st angry over Yum Brands (owners of KE strategy that emphasized a shift ne franchises demand a fee for the rights toee sre monestnane nse me Smomiorne scotia Screener ecrtaeo eyes eee sere See a kes aaa art Shoe tasey pie ccomey on BEictaomepremee toes Tasers Somer po Stomsce semesters one peas a a ca Se ae 7a a nen nae matae Peer ete eee ela pees neeme ens The Franchise id your lawyer approve the franchise contract you'e Considering after ne or she studied it paregraph bY paragraph? oes the franchise give you an exclusive teritory for the length ofthe franchise? Under what circumstances can you terminate the fra= {hise contract and at what cost to You? "you sell your franchise, wll you be compensated; ‘Your goodwl (the value of your business's re tion ang other intangibles)? |" the franchisor sels the co ‘ment be protected? The Franchisorthe number of women who ow While women outa alas balF Ural Ulsteereeee saa 7 at double the rate of men, their ownership of franchises is about Some think there is not so much a glass ceiling for women as a lack of money. Many experts believe more needs to be done to women business owners about the opportunities and forms, able for franchise growth. The International Franchise A its efforts to attract more women into franchising * Women are getting the message. In fact, wom anymore; they're becoming franchisors as well. It’ women in charge and calling the shot culty getting financing for growing their mn costs can help. For ¢ Minority-owned businessé national rate, Franchisors arepours, home-based fi heir knowled Home-based f be a franchisee it shar bull ranging from ¢ rafirect mail services. But d home is € = a per day he put in to get the bi a franchise it is helpful to ask you willing to put in lo ioe ment? Are you motivated and well orga ed for the business? the space you ne y portant to check out the francl work? Its also imp E-Commerce in Franchising The Internet has cl ways. Most k- expanded their busi tual storefronts Sometimes franchiso the franchisors always bri Holiday Inn's) ‘InterContinental Amstel hte! in Amsterdam, been ce Nett or example, @ ’ franchis S with each othersoclAL MEDIA IN business franchise Expansion on Facebook sinough soci medias Stila sew sos tne bend ee eel Tne ice cream company Haagen se cea ro en an program simulates the day-to-day operations ofa Haagen-Dazs moan nas era Saline ee Aer, en ne gs i nec RRR RE Da ecome engaged with the game will move on to become ft pees ofa rel Heagen-Dazs store. Though I found no new imestors from lee Cream Boss as ofthis writing only time wil telifthe scheme is a success. ures Jason Ankeny, “Socal Cimber,” Entrepreneu Jana 25a eee that is revolutionizin, Candy Bouquet pl Some rent francl Franchisii anchising profits ine now pines, and the Plusport 10 £ ball trans per SUP give P ulations 110 ducts a ple thou global tranch Strip w Just as McD 1 Norkdwide, foreign fi jnises like Kt threes ike tax preparer HER Blog Block even has its headquarters 1 hoping to change our tastes heres Noodle Bars become @ part of Frur frozen yogurt wants us 0 sandwic Japanese franc LEARNING goal 6 Explain the role of C09MowtoFormaBusiess CHAPTERS. st soa: Some Top copa han NY FS in agus and other nds ag WHICH FORM OF OWNERSHIP IS FOR You? Yo can build your own business in a y proprietorship, partne a ays, You can start your OWA. hip, corpor can buy a franchise and be part of a laren oe ee oF rooperative oa disadvantages to each a larger corporation. There are advantages disad matives carafe Pefore you decide which form is for sou, eval The miracle of free enter n make risks acceptable Sy en {he freedom and incentives of capil accep many people who go on to create the great CORDOs rations of America You know many of their names ‘and companies: ‘ome ren ed eee Jobs (Apple Computer), Sam Walton (Walmar) ae fenry Ford (Ford Motor Company), Thomas (General Electric), Bill Gates (Microsoft) and se on Te and so on. They started small, CCU mulated capital, grew, and became industrial leaders, Could you do ae progress asse: + What are some of the factors to consider before buying a + What opportunities are available for starting a global fran + What is a cooperative? Learning Goal 1. Compare the proprietorships. «© What are the advantages. ‘The advantages of sole prop ing, ability to be your and no special taxes. financial resources, mitment, few fringe ‘The three key shared profits= part? # boven jetors and g Fav their business. They pag ; yes CALE i ; nan ey pay all de ther personal possessions 10 pay busin hae s their houses, CAS = ; e ‘What does lim , pis and dam partners are res" : property is not a + What is a master limited parts ‘master limited partnership IS partnership. pr tages and disadvantages of Jude more finan ial reson ge, and longer survival. Th is, disagreemer nership? ‘a partnership that other personal but is taxed like a + What are the The advantages inc and pooled knowl unlimited liability, division of pro difficulty of termination. 31 3. Compare the advantages and Learning ences between C corpa and summarize the diffe and limited liability companies. ‘* What is the definition of a corporation? A corporation is a state-chartered legal entity have liability separate from its owners. y ‘* What are the advantages and disadvant The advantages include more money Perpetual life, ease of o than 100 stockh ol stockholders m het residents, and Boome fre of limited Haye and give Tole of Joye les 0Learning Goal 5. Outline the advantages and disadvantages of cuss the CpPortunities for diversity in franchising and the challem oe oe diversity in fr wg and the chall * What is a franchise? An arrangement to buy the rights to use the products or services in a given territory ie # What is a franchisee? A franchisee is a person who buys a franchise. ‘+ What are the benefits and drawbacks of being a franchisee? ‘The benefits include getting a nationally recognized name and rep fen management system, promotional assistance, and pride 6 2 Drawbacks include high franchise fees, managerial regi shared profits, and transfer of adverse effects if other franchisees: ‘+ What is the major challenge to global franchises? It is often difficult to transfer an idea or product that worked United States to another culture. It is essential to adapt to the Learning Goal 6. Explain the role of cooperatives. ‘+ What is the role of a cooperative? Cooperatives are organizations owned by members/cust ple form cooperatives to acquire more economic have as individuals. Small businesses often form € more purchasing, marketing, or product developme business name and alled a franchise.results wit own business? mnds whom Yo Have you thought 300" xctive? Thi Ianch the business. nancial resources: ture. How much friend(s) might b "hove you alread personal skills will ion plan for neede ben capital ne of the following ni « you want to open 0 id you choose for each 3. Let's assume form of business ownership WOU" 1. Video game rental store. >, Wedding planning service «, Software development firm. 4. Online bookstore. continually change hands. Me lude mergers, acquisitions, arch for an article o2, Go back to the home page a, has the potential of fulfiling te the Search tool to find a franchise that profile of the franehiee entrepreneurial dreams. N link is available. Refs ‘omeneed Explore the franchise's website if a ee ee tions listed in Figure 5.8 in this chapter and assess the strengths and Weaknesses of yoni fod franchise. (Hin The website also contai evaluating a franchise listing) {avigate to the Bt anchise listing.) 3, Did your search give you enough infor, ion. Bee gh information to answ fer most of the ques. ot, what other inform can you obtain it? mons ation do you need, and where casing the web To access the case “Stopped Cold,” visit www.mhhe.com/ubl0e To access the video case featuring PODS, visit www.mhhe.com/ublO