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Chapter 36 sole proprietorships and franchises

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Chapter 36 Sole Proprietorships and Franchises Starting a Business • To begin a business, entrepreneurs must select a form of organization. • The correct form of business organization can reduce taxes, reduce liability, and reduce conflict. • If an entrepreneur does not make a choice for himself/herself, the law will automatically select a default option. Sole Proprietorships • The sole proprietorship is merely an extension of its only owner, the sole proprietor. • The sole proprietorship is not a legal entity. • Formation: • Very easily and inexpensively. Sole Proprietorships • Advantages: • the ease and low cost to form; • the proprietor receives all of the profits; • the owner has the maximum degree of control over business decisions; and • the sole proprietorship can be easily transferred or sold if and when the owner desires to do so. Sole Proprietorships • Disadvantages: • the proprietor has unlimited liability for any losses or liabilities incurred by the entity; • the entity will not survive the proprietor’s death, disability, or retirement; and • the proprietor may only raise capital for the business out of his personal funds and from loans others are willing to make based on his personal liability. Franchises • A contractual relationship where the owner of a trademark, trade name, commercial symbols, operation, system, process, or copyright (the franchisor) allows another person or entity (the franchisee) to use that pr ...
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