Welcome to Business Studies• Grade 8• By M.I Mlambo• 201234563

Learning outcomes• Learner will:Know and understand the different types of forms of

ownershipExplain each formKnow the advantages and disadvantages of each form of

ownership

Chapter 1• Forms of ownership

1. SOLE PROPRIETORSHIP2. FRANCHISES3. PARTNERSHIPS

SOLE PROPRIETORSHIP

• A sole proprietor is simply a person who is engaged in business as an individual

• The owner takes all the risks of the business• The owner receive all the profits of the business

ADVANTAGES OF SOLE PROPRIETORSHIPS1. EASE OF STARTING AND ENDING THE BUSINESS. All you need is a

permit from the local government.

2. BEING YOUR OWN BOSS. Working for yourself is exciting.

3. PRIDE OF OWNERSHIP. Sole proprietors have taken the risk and deserve the credit.

4. LEAVING A LEGACY behind for future generations.

5. RETENTION OF COMPANY PROFITS. You don=t have to share profits with anyone.

6. NO SPECIAL TAXES. Profits of the business are taxed as the personal income of the owner.

DISADVANTAGES OF SOLE PROPRIETORSHIPS.1. UNLIMITED LIABILITY is the responsibility of business owners for all of the debts of the business.

2. LIMITED FINANCIAL RESOURCES. Funds available are limited to the funds that the sole owner can gather.

3. MANAGEMENT DIFFICULTIES. Many owners are not skilled at record keeping.

4. OVERWHELMING TIME COMMITMENT. The owner has no one with whom to share the burden.

5. FEW FRINGE BENEFITS. Fringe benefits can add up to 30% of a worker=s income.

6. LIMITED GROWTH.

7. LIMITED LIFE SPAN. If the sole proprietor dies or leaves, the business ends.

PARTNERSHIPS

A partnership is a legal form of business with two or more owners

TYPES OF PARTNERSHIPS.

1. A GENERAL PARTNERSHIP is a partnership in which all owners share in operating the business and in assuming liability for the business=s debts.2. A LIMITED PARTNERSHIP is a partnership with one or more general partners and one or more limited partners.

ADVANTAGES OF PARTNERSHIPS.• MORE FINANCIAL RESOURCES. Two or more people pool their

money and credit.

• SHARED MANAGEMENT AND POOLED/

• COMPLEMENTARY KNOWLEDGE. Partners provide different skills and perspectives.

• LONGER SURVIVAL. Partners are four times as likely to succeed as sole proprietorships.

• NO SPECIAL TAXES. All profits of partners are taxed as personal income of the owners.

DISADVANTAGES OF PARTNERSHIPS.

• UNLIMITED LIABILITY.-Each general partner is liable for the debts of the firm, no matter who was responsible for causing those debts.-You are liable for your partners' mistakes as well as your own.

• DIVISION OF PROFITS. Sharing profits can cause conflicts.

• DISAGREEMENTS AMONG PARTNERS.-Disagreements can arise over division of authority, purchasing decisions, and so on.-Because of such potential conflicts, all terms of partnership should be spelled out IN WRITING to protect all parties.

• DIFFICULT TO TERMINATE. For example: Who gets what and what happens next?

FRANCHISES.• A FRANCHISE AGREEMENT is an arrangement whereby

someone with a good idea for a business (the FRANCHISOR) sells the rights to use the business name and to sell a product or service (the FRANCHISE) to others (the FRANCHISEE) in a given territory

ADVANTAGES OF FRANCHISES:• MANAGEMENT AND MARKETING ASSISTANCE, including an

established product, help in choosing a location, and assistance in all phases of operation.

• 2. PERSONAL OWNERSHIP: You are still your own boss, although you must follow the rules, regulations, and procedures of the franchise.

• 3. NATIONALLY RECOGNIZED NAME: You get instant recognition and support.

• 4. FINANCIAL ADVICE AND ASSISTANCE.•

ADVANTAGES OF FRANCHISES

a. Franchisees get assistance arranging financing and learning to keep records. b. Some franchisors will even provide financing to potential franchisees.

5. LOWER FAILURE RATE. a. Historically, the failure rate for franchises has been lower than that of other business ventures.b. You should carefully research any franchise before investing.

DISADVANTAGES OF FRANCHISES.• LARGE START UP COSTS.‑

a. Most franchises will demand a fee to obtain the rights to the franchise. b. Start-up costs can be as high as R2 million for a Krispy Kreme franchise.

DISADVANTAGES OF FRANCHISES• COATTAIL EFFECTS.

a. The actions of other franchisees have an impact on the franchise=s future growth and level of profitability, a phenomena known as a COATTAIL EFFECT.b. Franchisees must also look out for competition from fellow franchisees.

DISADVANTAGES OF FRANCHISES• RESTRICTIONS ON SELLING.

a. Many franchisees face restrictions in the reselling of their franchises. b. Franchisors often insist on approving the new owner, who must meet their standards.

List of references• http://faculty.valenciacollege.edu/srusso/ch5.htm• http://www.mslawyer.com/businesr.htm• Operations management(2012)