SECTION 2: PARTNERSHIPS AND FRANCHISES

Chapter 8: Business Organizations

PARTNERSHIPS

A business organization that is Owned by two or more people Responsibilities are split Profits are split

TYPES OF PARTNERSHIPS

General Partnership Most common type of partnership Characteristics

Share responsibilities equally Share profits equally Share liability equally

UNLIMITED,PERSONAL,LIABILITY!

TYPES OF PARTNERSHIPS

Limited Partnership Characteristics

Only one partner runs the business Only one partner shoulders

UNLIMITED,PERSONAL,LIABILITY!

TYPES OF PARTNERSHIPS

Limited partnerships Characteristics

Second* partner’s role Contribute money LIMITED liability – can only lose investment Collect share of profits

Second partner’s limitations No say in how to run business “Silent Partner”

TYPES OF PARTNERSHIPS

Limited Partnership Partners are not equal One must be the “general” partner

Controls the company UNLIMITED PERSONAL LIABILITY Splits the profits

Other partner(s) Put up money Shares profits Has NO SAY / NO CONTROL

TYPES OF PARTNERSHIPS

Limited Liability Partnerships Similar to General Partnership Partners are pretty much equal There is LIMITED liability

Only company assets are at risk Only partner’s assets are at risk if he or

she makes the mistake Only certain types of companies can be

“LLPs”

PARTNERSHIPS

Advantages Easy and inexpensive

to establish Little government regulation More than one person contributes

money and skills Can offer more fringe benefits Shared decision making

PARTNERSHIPS

Disadvantages Potential conflict with partner(s) Unlimited liability (except LLPs) If your partner messes up and the

company suffers, you suffer too! Lack of permanence

PARTNERSHIPS

YOUR TURN:1. Which one of the three forms of partnerships do you think is best?

2. Why is it better than the other two forms?

(Give at least TWO good reasons.)

FRANCHISES

SEMI-independent business Pays fees to parent company Gets rights to open a store

in a certain area

FRANCHISES

Advantages1. Training and support from the parent

company2. Standardized quality requirements

attract customers3. Advertising benefits4. Financial aid from parent company5. Bulk buying benefits

FRANCHISES

Disadvantages1. Payments to mother company

a. Fees to start the businessb. A portion of the profits (royalties)

2. Mother company sets strict standards

3. You MUST purchase from mother company or from approved markets

4. Limited to selling only their products

FRANCHISESYOUR TURN:

You investigate the idea of opening your own franchise. (Sears Hardware Store?)

1.Which advantage(s) is/are most important to consider? Why?

2.Which disadvantage(s) is/are most important to consider? Why?

3.Do you do it?