*
*
*
Nickels McHugh
Nickels McHugh McHughMcHugh
*
*
Choosing a
Form of
Business
Ownership
5
C
H
A
P
T
E
R
*
*
*
*
•
•
Students able to:
Students able to:
•
•
Compare the advantages and disadvantages of
Compare the advantages and disadvantages of
sole proprietorship, partnership, C corporation,
sole proprietorship, partnership, C corporation,
S corporation, limited liabilities companies.
S corporation, limited liabilities companies.
•
•
Outline the advantages and disadvantages of
Outline the advantages and disadvantages of
franchises, and discuss the opportunities for
franchises, and discuss the opportunities for
diversity in franchising and the challenges of
diversity in franchising and the challenges of
global franchising
*
*
*
•
•
Lecturing on teaching material
Lecturing on teaching material
•
•
Discuss about,
Discuss about,
“
“
Franchising or
Franchising or
Partnering dilemma for new
Partnering dilemma for new
brand business
brand business
”
”
•
•
Merger & Acquisitions Game
Merger & Acquisitions Game
•
•
Paper on choosing business
Paper on choosing business
form
*
Sole Proprietorship
Sole Proprietorship
Sales
Sales
Number
Number
Type of Ownership
*
*
*
•
• Ease of start/endEase of start/end
•
• Be your own bossBe your own boss
•
• Pride of ownershipPride of ownership
•
• Leave a legacyLeave a legacy
•
• Retain profitRetain profit
•
• No special taxesNo special taxes
•
• Unlimited liabilityUnlimited liability
•
• Limited financial Limited financial resources
resources
•
• Management difficultyManagement difficulty
•
• Time commitmentTime commitment
•
• Few fringe benefitsFew fringe benefits
•
• Limited growthLimited growth
•
*
*
*
*
*
•
•
Master Limited Partnership
Master Limited Partnership
•
•
Traded Publicly
Traded Publicly
•
•
Taxed As A Partnership
Taxed As A Partnership
•
*
*
*
!
*
*
*
!
!
•
•
Conventional
Conventional
‘
‘
C
C
’
’
•
•
S Corporation
S Corporation
•
*
*
*
•
•
Private: Not Traded on Any
Private: Not Traded on Any
Stock Exchange
Stock Exchange
•
•
Public: Shares
Public: Shares
are
are
Traded on
Traded on
One or More Stock Exchanges
One or More Stock Exchanges
•
•
Non
Non
-
-
Profit: Performs Public
Profit: Performs Public
Service, Has Special Tax
Service, Has Special Tax
Considerations to Encourage
Considerations to Encourage
Formation
*
2.
General Electric
General Electric
3.
3.
American Intl Group
American Intl Group
4.
4.
Bank of America
Bank of America
5.
5.
HSBC Group
HSBC Group
6.
6.
ExxonMobil
ExxonMobil
7.
7.
Royal Dutch/Shell
Royal Dutch/Shell
8.
8.
BP
BP
9.
9.
ING Group
ING Group
10.
10.
Toyota Motor
Toyota Motor
11.
11.
UBS
UBS
12.
12.
Wal
Wal
-
-
Mart Stores
Mart Stores
13.
13.
Royal Bank of Scotland
Royal Bank of Scotland
14.
14.
JP Morgan Chase
JP Morgan Chase
15.
15.
Berkshire Hathaway
Berkshire Hathaway
16.
16.
BNP Paribas
BNP Paribas
17.
17.
IBM
IBM
18.
18.
Total
Total
18.
18.
Verizon Communication
Verizon Communication
20.
*
*
*
$
$
%
%
&
&
'
'
1.
1.
Cargill /
Cargill /
agricultural commodities, food agricultural commodities, food$66,669
$66,669
2.
2.
Koch Industries /
Koch Industries /
chemicals, energy, techchemicals, energy, tech60,000
60,000
3.
3.
Mars /
Mars /
candy, pet food electronicscandy, pet food electronics19,100
19,100
4.
4.
PricewaterhouseCoopers /
PricewaterhouseCoopers /
accountingaccounting18,700
18,700
5.
5.
Publix Supermarket / supermarkets
Publix Supermarket / supermarkets
18,686
18,686
+ ,--. + ,--.
/ 0
*
Bank of New York
Bank of New York
Seeds
Seeds
1784
1784
D.
D. LandrethLandreth SeedSeed
Adhesives & Coatings
Adhesives & Coatings
1767
1767
Dexter
Dexter
Insurance
Insurance
Contributorship
Covenant Life Ins.
Covenant Life Ins.
Conveyer Belts
Conveyer Belts
1702
1702
J. E. Rhoads & Sons
J. E. Rhoads & Sons
Type of Company Type of Company Year Started
Year Started Company
*
*
*
(
(
$
$
)
)
*
*
*
*
*
(
&
*
•
Individual or
Individual or
Estates
Estates
•
•
U.S. citizens or
U.S. citizens or
permanent
permanent
residents
can be passive
can be passive
•
*
*
*
%
%
# %
# %
+
+
!
!
•
•
Limited Liability
Limited Liability
•
•
Tax Choice
Tax Choice
•
•
Flexible Ownership
Flexible Ownership
Rules
Rules
•
•
Flexible Profit &
Flexible Profit &
Loss Distribution
Loss Distribution
•
•
Operating Flexibility
Operating Flexibility
•
•
No Stock
No Stock
•
•
Limited Life Span
Limited Life Span
•
•
Fewer Incentives
Fewer Incentives
•
•
Taxes
Taxes
•
*
*
*
!
!
(
(
&
&
&
*
,
No
*
*
*
% '
% '
& #
& #
!
!
1
*
*
*
" ! (
" ! (
&
&
$
$
"
"
-.
-.
•
•
Companies Overpay to
Companies Overpay to
Acquire Another Firm
Acquire Another Firm
•
•
Acquiring Company
Acquiring Company
Overestimates Cost Savings
Overestimates Cost Savings
and Synergies
and Synergies
•
•
Managers Disagree About
Managers Disagree About
Integrating Operations
Integrating Operations
•
•
Obsession with Cost Cutting Hurts Business,
Obsession with Cost Cutting Hurts Business,
Costing Top Employees & Customers
*
*
*
( /
( /
/ 0
/ 0
““DEAL and BREAKDEAL and BREAK12
12
””(
(
•
• KartuKarturemiremi dikocokdikocokdandandibagidibagi secarasecara meratameratakepadakepada5 5 kelompokkelompok, , sisanyasisanya disimpan
disimpan oleholeh dosendosen..
•
• MasingMasing--masingmasingkelompokkelompok memilikimemiliki target target untukuntuk mengumpulkanmengumpulkan point point sebanyak
sebanyak--banyaknyabanyaknya dengandengan caracara melakukanmelakukan pertukaranpertukaran kartukartudengandengan kelompok
kelompok lain lain dalamdalam waktuwaktu 5 5 menitmenit. .
•
• NilaiNilaisesuaisesuai dengandengan angkaangka yang yang terteratertera padapadakartukartu, , khususkhusus untukuntukjack, jack, queen, king
queen, king dandanace ace bernilaibernilai15. 15. NilaiNilai dengandengan gambargambar yang yang samasamalangsunglangsung dijumlahkan
dijumlahkan, , jikajika adaada gambargambar dengandenganwarnawarna yang yang samasama makamaka ditambahkanditambahkan
separo
separo daridari nilainilai yang yang terteratertera, , sedangkansedangkan untukuntuk gambargambardengandengan warnawarnabedabeda maka
maka akanakanmengurangimengurangi nilainilai sejumlahsejumlah yang yang terteraterterapadapada kartukartu..
•
• JikaJikasebuahsebuah kelompokkelompok yakinyakin bahwabahwa groupgroup--nyanya mengumpulkanmengumpulkan nilainilai tertinggi
tertinggi sebelumsebelum waktunyawaktunyamakamaka dapatdapat menghentikanmenghentikanpermainanpermainandengandengan mengatakan
mengatakan ““BreakBreak””, , JikaJikaternyataternyata setelahsetelah dihitungdihitungkelompokkelompok tersebuttersebut meraih
meraih nilainilai tinggitinggi makamaka total total nilainilai dinaikkandinaikkan 25%, 25%, namunnamunjikajika adaada kelompokkelompok lain yang
lain yang lebihlebih tinggitinggi makamaka nilainilai kelompokkelompokiniini akanakan menjadimenjadinol.nol.
•
• PermainanPermainan dapatdapat diulangdiulang 3 kali, 3 kali, pemenangpemenangadalahadalah kelompokkelompok yang yang memilikimemiliki nilai
nilai tertinggitertinggi daridari3 kali 3 kali permainanpermainan..
•
• GambarGambar yang yang samasama dianggapdianggapsebagaisebagai asset asset utamautama, , warnawarna yang yang samasama
dianggap
dianggap asset asset pendampingpendamping, , sedangkansedangkan warnawarnayang yang bedabedadianggapdianggap hutang
*
*
*
!
!
•
•
Franchise
Franchise
Agreement
Agreement
•
•
Franchisor
Franchisor
•
*
*
*
Franchisor, Inc. Franchisor, Inc.
Franchisee
Franchisee
*
*
%
%
33333
*
*
*
•
•
Assigns Territory
Assigns Territory
•
•
May Provide
May Provide
Financial Aid/Advice
Financial Aid/Advice
•
•
Offers Merchandise/
Offers Merchandise/
Supplies at
Supplies at
Competitive Price
Competitive Price
•
•
Provides
Provides
Training/Support
Training/Support
•
•
Business
Business
Expansion Using
Expansion Using
O.P.M.
*
*
*
•
•
Pays Up
Pays Up
-
-
Front Costs
Front Costs
•
•
Makes Monthly Payment to
Makes Monthly Payment to
Franchisor
Franchisor
•
•
Runs Business by Franchisor
Runs Business by Franchisor
’
’
s
s
Rules/Procedures
Rules/Procedures
•
•
Buys Materials from Franchisor/
Buys Materials from Franchisor/
Approved Supplier
*
*
*
•
•
Management &
Management &
marketing assistance
marketing assistance
•
•
Personal ownership
Personal ownership
•
•
Recognized name
Recognized name
•
•
Financial advice &
Financial advice &
assistance
assistance
•
•
Lower failure rate
Lower failure rate
•
•
High start
High start
-
-
up costs
up costs
•
•
Shared Profit
Shared Profit
•
•
Management regulation
Management regulation
•
•
Coattail effects
Coattail effects
•
•
Restrictions on selling
Restrictions on selling
•
*
Krispy
Kreme
Kreme
11.5%
Burger King
Burger King
Royalty
Royalty
Initial Fee
Initial Fee
Company
*
*
*
*
'
#
*
'
#
%
.
%
.
1.
1.
Research officers & their
Research officers & their
business experience
business experience
2.
2.
Get summary of any bankruptcy
Get summary of any bankruptcy
& litigation
& litigation
3.
3.
Estimate
Estimate
all
all
costs to set up
costs to set up
franchise
franchise
4.
4.
Review franchise contract & three
Review franchise contract & three
most recent financial statements
*
*
*
*
*
3
3
#
#
•
•
Flexible work hours
Flexible work hours
•
•
Quality lifestyle
Quality lifestyle
•
•
Doing the work of
Doing the work of
your
your
choice
choice
•
•
Opportunity to expand
Opportunity to expand
using technology
using technology
•
*
*
*
& 0
& 0
3
3
•
•
Technology
Technology
-
-
Faster
Faster
Customer Service
Customer Service
•
•
Access to International
Access to International
Markets
*
*
*
'
'
•
•
Farm Cooperative
Farm Cooperative
•
•
Owned & Controlled by People
Owned & Controlled by People
Who Use It
Who Use It
•
•
Pool of Resources
Pool of Resources
•
*
*
*
%
%
2
2
“
“Franchising or Partnering dilemma for new brand businessFranchising or Partnering dilemma for new brand business””
•
• 3 3 anakanak mudamuda pencintapencinta kopi kopi memilikimemiliki ideide membuatmembuat sebuahsebuah bisnis
bisnis kopi kopi berupaberupa outlet mini yang mobile outlet mini yang mobile untukuntuk melayanimelayani peminum
peminum kopi kopi secarasecara express (take away). express (take away). IdealnyaIdealnya outlet outlet mini
mini iniini beradaberada didi koridor2 mal koridor2 mal atauatau pusatpusat keramaiankeramaian lain. lain. Konsep
Konsep iniini dinamakandinamakan dengandengan brand COGO (Coffee On the brand COGO (Coffee On the Go).
Go). BisnisBisnis iniini sudahsudah dijalankandijalankan selamaselama 6 6 bulanbulan dandan hasilnya
hasilnya sudahsudah menunjukkanmenunjukkan bahwabahwa dalamdalam bulanbulan keke 15 15 mereka
mereka akanakan mencapaimencapai break even point (BEP).break even point (BEP).
•
• Agar Agar bisnisbisnis merekamereka tumbuhtumbuh pesatpesat didi kotakota--kotakota lain lain merekamereka mengkaji
mengkaji 2 2 polapola bentukbentuk kepemilikankepemilikan bisnisbisnis yaituyaitu franchising franchising atau
atau partnering. partnering. DiskusikanDiskusikan dengandengan kelompokkelompok andaanda manamana bentuk
bentuk bisnisbisnis yang paling yang paling tepattepat untukuntuk merekamereka dandan apaapa alasannya
*
*
*
•
• BuatlahBuatlah paper paper sebuahsebuah bisnisbisnis yang yang fenomenalfenomenal, yang , yang inginingin andaanda mulai
mulai saatsaat iniini..
•
• ProdukProduk dandan jasajasa apaapa yang yang akanakan andaanda tawarkantawarkan keke padapada customer customer anda
anda??
•
• SiapaSiapa sajasaja customer customer andaanda dandan siapasiapa kompetitorkompetitor andaanda??
•
• ApakahApakah andaanda memilikimemiliki semuasemua skill skill dandan kemampuankemampuan untukuntuk menjalankan
menjalankan bisnisbisnis iniini atauatau andaanda membutuhkanmembutuhkan orangorang lain lain untukuntuk menjalankan
menjalankan bisnisbisnis iniini? ? JikaJika yaya, skill , skill dandan kemampuankemampuan apaapa yang yang anda
anda butuhkanbutuhkan daridari orangorang lain lain tersebuttersebut..
•
• ApaApa bentukbentuk kepemilikankepemilikan bisnisbisnis yang yang andaanda akanakan pilihpilih? ? ApaApa alasanalasan anda
