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Chapter 4 –Selecting a Type of Ownership

Business Ownership Spring 2007 Williams
C. Greene, (2000). Entrepreneurship Ideas in Action. Cincinnati, OH: South-Western.

Lesson 4. You can:     Purchase an existing business Enter a family business Purchase a franchise Start your own business .2 Own a Franchise or Start a Business  There are several ways of going into business and becoming an entrepreneur.

Franchise Ownership   A franchise is a legal agreement that gives an individual the right to market a company’s products or services in a particular area. 75) The two parties to a franchise agreement are the franchisor. the distributor of a franchised product/service . and the franchisee. the parent company of a franchise agreement that provides the produce/service. (pg.

Operating Costs of a Franchise     The initial franchise fee is the fee the franchise owner pays in return for the right to run the franchise. Advertising fees are fees paid to support advertising of the franchise as a whole. Start-up costs are the costs associated with beginning a business. 75-76) . Royalty fees are weekly/monthly payments made by the owner of franchise. (pg.

.Starting Your Own Business  For whatever reason. This means to be an entrepreneur you will have to establish a business of your own. running an existing business or operating a franchise may not be right for you.

Advantages of Starting Your Own Business     Independence Satisfaction Challenge of creating something new Triumph when business is profitable (pg. 79) .

Disadvantages of Starting Your Own Business    RISKS Uncertainty of demand for the product/service Need to make decisions daily (pg. 80) .

you must decide what type of ownership the business will have. There are three types of ownership arrangements to choose from:    Sole Proprietorship Partnership Corporation .3-Choose the Legal Form of Your Business   Once you decide to start your own business.Lesson 4.

Types of Business Arrangements    A business that is owned exclusively by one person is a sole proprietorship. (pg. A business owned by two or more people is a partnership. 82) . A business with the legal rights of a person and which may be owned by many people is a corporation.

Sole Proprietorship   Sole proprietorships enable a person to be in control of all business aspects with little government control. (pg. A sole proprietor may find it difficult to raise money and encounter greater loss of private assets. 82) .

This agreement is to set down in writing the rights and responsibilities of each of the owners. 83)  .Partnership  Advantages:    Shared decision making Losses shared by all partners Little government regulation Partners may not like shared profits DISAGREEMENTS  Disadvantages:   Partnership Agreement: When two or more entrepreneurs go into business together. (pg. they generally sign a partnership agreement.

Since a corporation has the legal rights of a person.Corporation   Unlike a sole proprietorship or a partnership. not the owners. pays taxes. enters into contracts. the corporation. . and may be held liable for negligence. a corporation is treated independently of its owners.

nation-wide.Team Activity  Find a business either local. or world wide that represents each of the three business arrangements. .

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