Week 3 Individual Assignment Worksheet

Week 3 Individual Assignment Worksheet

There are seven forms of business: sole proprietorship, partnership, limited liability partnership, limited liability company (including the single member LLC), S Corporation, Franchise, and Corporation. 1. Select one of the forms of business 2. Research and provide three advantages and three disadvantages for this business form. 3. Provide a 100- to 200-word summary in which you provide an example business for each form. Discuss at least one of the advantages and one of the disadvantages of that form and potential legal forms that might be required. Business Form: Franchise Advantages 1. The entrepreneur is starting with a business plan that already exists. The franchise formula is working in the market so the uniform coordination helps the franchise run efficiently versus learning what processes work best through trials and error. 2. The entrepreneur benefits from group marketing of the franchise. 3. The entrepreneur receives support from the larger company. The support can range from contract negotiations to training employees on the processes to run the business efficiently. Disadvantages 1. The franchise fee can range from several thousands to hundreds of thousands. In addition, there is cost to purchase the equipment and space. Once up and running, the franchisee usually pays the franchisor a percent of the gross monthly sales. 2. There is no room to be innovative and you can’t operate independently when you own a franchise. If you have a new idea, this idea must be approved by the franchisor before implementation. For example, the franchisor determines the signs and products that are used by the franchisee’s business. 3. Reputation control is a disadvantage of owning a franchise. If the franchisor is in the news for something negative the franchisee’s store takes on the same bad reputation although his or her store was not involved in the issue.

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Summary A legal form is not needed to start a sole proprietorship or partnership. They are both easy to form, an advantage. Unlimited personal liability is a disadvantage of both. The local hardware store is a sole proprietorship. The local grocery store owned by sisters is a partnership. Organizers of limited liability partnership (LLP) and limited liability company (LLC) must file articles of organization with the state. Flexible ownership is an advantage of LLPs and LLCs. A disadvantage is interstate commerce as each entity does not transfer between every state. Some states will not recognize and LLP or LLC as a business entity. An attorney office is an example of an LLP and a home business is an example of an LLC. S Corporation and Corporations apply for state charters and have articles of incorporation. A disadvantage of S Corporation and Corporations is ongoing fees to maintain the company. An advantage is shareholders and directors are not liable for the company’s debts and obligations. Coca Cola is a corporation. A franchiser pays a franchise fee. An advantage is an existing busin

Week 3 Individual Assignment Worksheet