What are the different types of Businesses?

• SOLE PROPRIETORSHIP• PARTNERSHIP• CORPORATION• Monopoly• Oligopoly• Franchises

Why is it beneficial to start a business by yourself?

• SOLE PROPRIETORSHIP: business owned by one person.

SOLE PROPRIETORSHIP

Strengths Weaknesses

• easy to start - unlimited liability- responsible for all loses and debts

• easy to manage - difficult to raise financial capital• make all profits - size and efficiency• no business income tax - owners may lack “business sense”• personal freedom

of self employment - hard to find qualified employees- limited life

PARTNERSHIP• Strengths Weaknesses• Easy to establish - responsible for acts of

partners• Easy to manage - limited life• Lack of business - conflicts between

taxes partners• Easier to get funds• More efficient• Attract talented employees

Why is it beneficial to go into business with a partner?

• PARTNERSHIP: business jointly owned by two or more people.

• General partnership: all partners are responsible• Limited partnership: one partner is not active in

daily management but contributes funds ($)• Limited liability: only responsible for your share of

the investment• Articles of partnership: contract between partners

CORPORATION:

• 90% of business• organized as separate legal entities• right to buy and sell property• enter legal contract• sue and be sued• need permission from the national gov’t –

charter

Corporation

• Stock: partial ownership of the firm• Dividends: earnings or profit• Bonds: “loan” to the company• Common Stock: “coach” • Preferred Stock: “first class” extra benefits

Corporation

• Strengths Weaknesses__________

• easy to get financial capital - charter is difficult to get• hire the best management - shareholders have little

voice• limited liability - must pay taxes on (sucks for stockholders) business• easy to transfer - unlimited life

- subject to gov’t regulations

WHAT HAPPENS WHEN COMPETITION IS ELIMINATED?

• In some industries, there are no substitutes and there is no competition. In a market that has only one or few suppliers of a good or service, the producer(s) can control price, meaning that a consumer does not have choice

Monopoly:

• a market situation with only one seller of a particular economic product that has no close substitute.

Monopoly:• A. Natural Monopoly: a market structure

in which there is only one producer/seller for a product. – 1. Franchise: Gives a company the exclusive

right to do business in a certain area without competition.

a. example: water or gas companiesB. Geographic Monopoly: no other business

in the immediate area offers any competition.

Monopoly:• C. Technology Monopoly: special privileges are

given to those who invent a new product or process lead to another kind of monopoly.

• 1. Patent: an exclusive right to manufacture, use or sell any new and useful product. (Plants also included)

• 2. Copyright: gives an author or artist the exclusive right to publish, sell, or reproduce their work for a lifetime.

• D. Government Monopoly: a business the government owns and operates.

• Utility and plant patents are granted for a term which begins with the date of the grant and usually ends 20 years later.

• a design patent lasts for 14 years

http://www.monkey.org/~shinobi/images/Tigers/Twins7.gif

Oligopoly:

• a market situation in which a few very large sellers of a product dominate.

Oligopoly:• A. Price fixing: agreeing to

charge the same or similar prices for a product.

• B. Price War: a series of price cuts by all producers that may lead to unusually low prices in the industry.

• Example of Oligopoly• As an example, consider the market for cellular

phones in the United States.• There are four major players that account for

approximately 90% of the total national cellular phone market.

• These companies are:• Sprint-Nextel• T-Mobile• Verizon• AT&T

Franchises

Top 10 Franchises for 2009• 1. Subway 2. McDonald's• 3. Liberty Tax Service• 4. Sonic Drive In Restaurants• 5. InterContinental Hotels Group• 6. Ace Hardware Corp.• 7. Pizza Hut• 8. UPS Store, The/Mail Boxes Etc.• 9. Circle K 10. Papa John's Int'l. Inc.

McDonalds

• http://franchises.about.com/od/mostpopularfranchises/a/mcdonaldscosts.htm

Franchise:

© License to conduct a business under another person’s name

© Grant a franchisee permission to market its product

Franchisee:® can be a sole proprietorship, partnership, or

corporation and pay Franchiser fees

Examples of the top U.S. franchisers:

http://www.franchiseopportunities.com/

Franchise opportunities

• http://www.franchisedirect.com/foodfranchises/14

• http://www.franchiseexpo.com/Subway-Franchise.cfm

• http://www.franchise.com/franchise-directory.cfm?gclid=CNeHpLPQo54CFcNx5QodZzdjmw&src=google_FO&ef_id=1252:3:s_893e1ac3c9dc36b06ef48da29564c280_1340204985:SwvQg0NIYWQAABBwLBAAAACA:20091124122435

Should You Incorporate Your Small Business?

• http://sbinfocanada.about.com/cs/startup/a/incorporatadv.htm

• http://www.ahbbo.com/incorporatingyou.html

AdvantageAdvantage DisadvantageDisadvantage

1 Standardized quality1 Standardized quality 1 Limited Production line1 Limited Production line

2 National Advertising2 National Advertising 2 Strict operating standards 2 Strict operating standards and purchasing restrictionsand purchasing restrictions

3 Financial assistance3 Financial assistance 3 High Franchising fees 3 High Franchising fees and royaltiesand royalties

4 Centralized buying power4 Centralized buying power

5 Management training and 5 Management training and supportsupport

Legality:

• Franchising falls under the jurisdiction of a number of state and federal laws.

• There is no federal registry of franchising or any federal filing requirements for information,

• Franchisors are required by the Federal Trade Commission to have a Uniform Franchise Offering Circular to disclose potential franchisees about their purchase.

Major Sports

• In sport, a franchise is a club given permanent rights to play in a specific league.

• Major League Baseball ("MLB") is a legal cartel• The only way for new entrant to participate is

to buy an existing club and this is known as "buying the franchise“

• Also, all major sports teams franchise their name and logos to be used in all kinds of merchandise.

Pure Competition:• There are two extreme forms of market structure:

monopoly and, its opposite, perfect competition. • Perfect competition is characterized by many

buyers and sellers, many products that are similar in nature and, as a result, many substitutes.

• In a perfectly competitive market, should a single firm decide to increase its selling price of a good, the consumers can just turn to the nearest competitor for a better price.

Five Conditions of a Purely Competitive Market.

• 1. Large amount of buyers and sellers must exist.

• 2. Buyers and sellers deal in identical products.• 3. Each buyer and seller acts independently• 4. Buyers and sellers are reasonably well

informed• 5. Buyers and sellers are free to enter into,

conduct, or get out of business.