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Chapter 7 em
Chapter 7 em
ENTREPRENEURIAL MANAGEMENT
CHAPTER 7
SELECT A TYPE OF OWNERSHIP
SUBMITTED BY:
COLEGIO, KRISTEL G.
LUCERO, JULIANA
MARASIGAN, SHANE ALEXIS
HRMGT-3201
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Rosario Campus
Brgy. Namunga, Rosario, Batangas, Philippines +63 43 980 - 0385 loc. 4211
www.batstate-u.edu.ph cabeihmdc.rosario@g.batstate-u.edu.ph
Rosario Campus
5. Ask how important information in written form. Get list of all assets to be
transferred to the new owner, a statement about any past or pending legal action against
the business, a copy of the business lease or mortgage, and a list of all the suppliers.
6. Determine how would you finance the business. Contact lending institutions, and
ask the seller if he or she would be willing to finance part all of the purchase.
7. Get expert help to determine a price to offer for the business. An accountant or a
valuator an expert on determining the value of a business can help.
Franchise Ownership
Purchasing a franchise is another route by which you can become an entrepreneur.
Franchise- a legal agreement that gives an individual the right to market a company’s
product or services in particular area.
Franchisee- the person who purchases a franchise agreement
Franchisor- the person or company that offer a franchise for purchase.
Operating Cost of a Franchise
Initial franchise fee- The amount the local franchise owner pays in return for the right to
run the franchise.
Start-up Costs- The cost associated with beginning a business, they include the cost of
renting a facility, equipping the outlet and purchasing inventory
Royalty Fees- Are weekly or monthly payments made by the local owner t franchise
company.
Advertising Fees- Paid to the franchise company to support television, magazine, or
other advertising of the franchise as a whole.
Investigate The Franchise Opportunity
The Federal Trade Commission’s (FTC) Franchise and Business Opportunity Rule
requires franchise and business opportunity sellers to give you specific information to
help yo make an informed decision about your purchase. The seller must give you a
detailed disclosure document at least ten business days before you pay any money or
legally commit yourself to a purchase.
The disclosure document should include the following:
* Names, address, and telephone numbers of at least ten previous purchasers who lived
nearest to you.
* The fully audited financial statements of the seller.
* Background and experience of the business key executives.
* Cost starting and maintaining the business.
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* The responsibilities you and the seller will have once you have invested in the
opportunity.
Evaluate a Franchise
Some of the things you should do when evaluating a franchise include the following:
1. Study the disclosure document and proposed contract carefully.
2. Interview current owners listed in the disclosure document carefully.
3. Investigate the franchisor’s history and profitability.
4. Investigate claims about your potential earnings.
5. Obtain from sellers in writing the number and percentage of owners who have done as
well as they claim you will.
6. Listen carefully to sales presentations.
7. Shop around.
8. Get the seller’s promises in writing.
9. Determine what will happen if you want to cancel the franchise
agreement.
10. Remember that it is okay to ask for advice from professionals.
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Entrepreneurs who work for their family businesses enjoy the pride and sense of
mission that comes with being part of a family enterprise. They also enjoy the fact
that their businesses remain in the family for at least one more generation. Some
enjoy working with relatives and knowing that their efforts are benefiting others
whom they care about.
Sole Proprietorship
A business that is owned exclusively by one person is a sole proprietorship. Sole
proprietorships enable one person to be in control of all business aspects.
Advantages of a Sole Proprietorship
The government exercises very little control over sole proprietorships, so such
businesses can be established and run very simply. Accurate tax records and
certain employment laws must be met, but these are usually the only forms of
government regulation for a sole proprietorship.
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It can be difficult to raise money for a sole proprietorship. You are the only
person investing money. You also bear the burden of all of the risks.
Partnership
A business owned by two or more people is a partnership.
Advantages of a Partnership
Running a business as a partnership means that you will not have to
come up with all of the capital alone. It also means that any losses the business
incurs will be shared by all of the partners.
Disadvantages of a Partnership
Some entrepreneurs do not like partnerships because they do not
want to share responsibilities and profits with other people. They fear
being held legally liable for the errors of their partners.
Partnership Agreement
When two or more entrepreneurs go into business together, they generally sign a
partnership agreement.
The sample partnership agreement identifies the following:
Name of the business or partnership
Names of the partners
Type and value of the investment each partner contributes
Managerial responsibilities to be handled by each partner
Accounting methods to be used
Rights of each partner to review and/or audit accounting documents
Division of profits and losses among the partners
Salaries to be withdrawn by the partners
Duration of the partnership
Conditions under which the partnership can be dissolved
Distribution of assets upon dissolution of the partnership
Corporation
A corporation is a business that has the legal rights of a person but is independent
of its owners. A share of stock is a unit of ownership in a corporation. There may
be many owners, who are called shareholders or stockholders.
Disadvantages of a Corporation
Setting up a corporation is more complicated than setting up a sole proprietorship
or a partnership. To incorporate, you will need the assistance of a lawyer, who
will help you file articles of incorporation with the state official responsible for
chartering, or registering, corporations. Because of this, establishing a corporation
can be costly.
Advantages of Incorporation
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S Corporation
A small corporation can elect to be treated as an S corporation. An S corporation
is a corporation organized under Subchapter S of the Internal Revenue Code.
Intellectual Property
Intellectual property is the original, creative work of an artist or inventor and may
include such things as songs, novels, artistic designs, and inventions.
Patents
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Trademarks
A trademark is a name, symbol, or special mark used to identify a business or
brand of product. Products that are trademarked are identified by the TM or ®
symbol.
Laws that Protect Consumers
Licenses
State and local governments require some businesses to have licenses. Beauty
salons, restaurants, and health and fitness centers are just some of the companies
that must carry licenses.
Zoning Laws
Local governments often establish zoning regulations that control what types of
buildings can be built in what areas. In many communities, certain areas are
zoned for residential use only. This means that business buildings may not be
built in those areas.
THE FEDERAL FOOD, DRUG, AND COSMETIC ACT OF 1938- This law
bans the sale of impure, improperly labeled, falsely guaranteed, and unhealthful
foods, drugs, and cosmetics.
THE CONSUMER PRODUCT SAFETY ACT OF 1972- This law sets
safety standards for products other than food and drugs.
THE TRUTH-IN-LENDING ACT OF 1968- This law requires all banks to
calculate credit costs in the same way. When a consumer gets a loan, the lender must
provide two types of information about the loan’s cost—the finance charge and the
annual percentage rate.
THE FAIR CREDIT BILLING ACT OF 1974- This law is part of the Truth-in-
Lending Act and helps consumers correct credit card billing errors.
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Contracts
One of the most common reasons that a business hires a lawyer is to assist with
contracts. A contract is a legally binding agreement between two or more persons
or parties.
For a contract to be considered legally binding, certain elements
must be included when the contract is created. These elements are
agreement, consideration, capacity, and legality.
Brgy. Namunga, Rosario, Batangas, Philippines +63 43 980 - 0385 loc. 4211
www.batstate-u.edu.ph cabeihmdc.rosario@g.batstate-u.edu.ph