How To Form A Business Lecture 4 PDF

3 How to Form a Business Sepideh Mahdikhani Dr. habil Madai Hajnalka  All business owners must decide for themselves which form of business is best for them.  it’s important to know that each of ownership has advantages and...

3 How to Form a Business Sepideh Mahdikhani Dr. habil Madai Hajnalka  All business owners must decide for themselves which form of business is best for them.  it’s important to know that each of ownership has advantages and disadvantages. Starting a business for yourself, or someday being a leading franchisor, going into a business with a partner, forming a corporation,  600.000 new businesses are started in the USA in each year. 90% There have been failures of new businesses all over the world.  sole proprietorships: a business that is owned, and usually managed, by one person. partnerships: a legal form of business with two or more owners.. corporations: a legal entity with authority to act and have liability apart from its owners..  Sole Proprietorships Advantages and Disadvantages  Advantages the easiest kind of businesses joys and frustrations of being in business on their own Ease of starting and Leaving a legacy ending the business Being your own boss Retention of company profits Pride of ownership No special taxes  Disadvantages Often difficult to save enough money to start and keep it going The costs of supplies, insurance, advertising, rent and so on may be too much cover alone Limited life span Less financial resources and Limited Overwhelming time commitment growth Unlimited liability - the risk of Few fringe benefits personal losses  Partnerships Advantages and Disadvantages Before plunging into a partnership, you should ask yourself these questions: 1. Do you share the same goals? 2. Do you share the same vision for the company’s future? 3. What skills does the person have? 4. Are those skills the same as yours or do they complement your skills? 5. What contract, resources will the person bring to the business? 6. What type of decision maker is the person? 7. Is this someone with whom you could happily share authority for all major business decision? 8. Do you trust each other?  Types: A partnership is a legal form of business with 2 or more owners. general partnerships: in which all owners share in operating the business and in assuming liability for the 50% business’s debts limited partnerships: a partnership with one or more general partners and one or more limited partners 30% master limited partnerships (MLP): looks much like a corporation (acts like a corp., and traded on a stock exchange) 90% but is taxed like a partnership and thus avoids the corporate income tax.  Advantages much easier to own and manage business with partners he may be skilled in accounting, while you do selling or servicing More financial resources Longer survival Shared management No special taxes  Disadvantages Any time 2 people must agree, conflict and tension are possible. partnerships can cause splits between relatives, friends and spouses Division of profits Disagreement among partners Unlimited liability Difficulty of termination  Corporation Advantages and Disadvantages  Corporation An S corporation is a unique state entity that looks like a corporation, but is taxed like a limited liability company or partnership. The paperwork and details for S corporations are similar to regular (C) corporations. S corporations have shareholders, directors and employees and enjoy the benefits of c limited liability, but their profits are taxed as Corporations personal income of the shareholders – thus A conventional corporation is a state- avoiding the double taxation of C licensed legal entity that has authority and corporations.. S liability separate from its owners Corporations (stakeholders).  Advantages Perpetual life/Because Ease of drawing talented corporations are separate employees from those who own them Ease of ownership Separation of ownership change from management  Disadvantages Often difficult to save enough money to start and keep it going The costs of supplies, insurance, advertising, rent and so on may be too much cover alone Extensive paperwork Double taxation-both a corporate tax Relatively hard to end return and an individual tax return Large corporations sometimes Possible conflict with stockholders become too inflexible and board  Have no more than 100 shareholders. (As of 2004, all members of a family can be counted as one shareholder.)? Avoiding double taxation is Have shareholders that are individuals or estates reason enough for approximately and are citizens or permanent residents of the 3 million USA companies to United States. operate as S corporations.’TextYetHere not all businesses can become S You can simply Have only one class of outstanding stock. (You impress your corporations. In order to audience qualify,and add can read more about the various classes of stock in Chapter 19.) a company must: a unique zing Not have more than 25 percent of income derived from passive sources (rents, royalties, interest, etc.). Newest Forms of Business LLC Franchise Merger Limited Liability Companies Many businesses are being attracted to the newest form of business ownership: the limited liability company (LLC). Billed as the "business entity of the future," a Limited Liability company (LLC) its similar to an S corporation but, \without the special eligibility requirements, You can simply impress your audience and add a unique zing and appeal to your Presentations. I hope and I believe that this Template will your Time, Money and Reputation. Today more than All of new business registrations in some states are LLCs.!! Advantages Disadvantages 1.Limited liability's Personal assets are protected 1.wnership is non-transferable 2.Choice of taxation, LLCs can choose to be taxed 2.Limited life span as partnerships or as corporations. 3.Fewer incentives 3.Flexible ownership rules. 4.Paperwor 4.Flexible distribution of profit and losses 5.Operating flexibility, LLCs do have to submit articles of organization agreement, describing how the company is to be operated. Franchise agreement An arrangement whereby someone with a good idea for a business sells the rights to use the business name and sell a product or service to others. Franchisor A company that develops a product concept and sells others the rights to make and sell the Products. Franchisee A person who buys a franchise. Advantages Disadvantages 1. Management and marketing assistance 1. Large start-up costs 2. Personal ownership 2. Shared profit 3. Nationally recognized name 3. Management regulation 4. Financial advice and assistance 5. Lower failure rate  Merger One company’s purchase of the property and obligations of another company. Types: Vertical merger The joining of two “companies involved in Different stages of related businesses. Horizontal merger The joining of two firms in the same industry Conglomerate merger The joining of firms In completely unrelated industries THANK YOU