Business Orgs Flashcards
What is the simplest form of business?
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What type of business organization offers the limited liability of a corporation, but the tax advantage of a partnership?
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What entity is an arrangement in which the owner of a trademark, trade name or copyright licenses another to use that IP?
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What type of entity would I create if I want to open my pink cupcake bakery?
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What type of entity would I create if I want to sell chai tea?
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What type of entity would I create if I want to open a funky handmade clothing store with my best friend?
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What type of entity would I create if I want to start a law firm with my law school study group?
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What type of entity would I create if I want to start an accounting firm 10 SOM classmates?
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What type of entity would I create if I want to sell Starbucks/Caribou/Saxby’s coffee?
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What type of entity would I create if I want to own a very large ski resort?
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Cat of the day: Vicky
- Vicky is the Chief Executive Cat
- Julie thinks she was a feral cat – barn cat or a dumpster cat
- Daughter of Vicky is May, who died from kidney disease
- Vicky did not like May
- May would be a sole proprietor
Burton’s and Snowbird Ice Cream
- Became Baskin & Robbins
- Irvine Robbins
- Cofounder of Baskin & Robbins
- Died at 90 in 2008
- Julie saw obituary and got excited (weirdo)
Who was Irvine Robbins?
- Irvine Robbins opened first shop (Snowbird Ice Cream) in 1945 in Glendale, CA
- Robbins was son of a dairyman
Why did Irvine Robbins want to start a business?
- When he worked for his father, he finished a days work happy
- Wanted to do the same when he started his own business
- Julie thinks that this is important
How did Irvine Robbins start his own business?
- In 1945, there were no pure ice cream stores
- Cashed in his insurance policy for $6000 that his father gave him for his Bar Mitzvah
- Wanted to start a partnership with Baskin, his brother-in-law
Did Baskin and Robbins start out together?
- No, Mr. Robbin’s father recommended that they not partner up initially, but instead start out separately
- Burt Baskin was married to Shirley, Irvine Robbin’s sister
- Baskin opened Burton’s Ice Cream shop instead
- By 1948, they started working together
What was Baskin-Robbins innovation?
• Their niche was to create unusual flavors
How did Baskin-Robbins business expand?
- Flipped a coin and decided whose name would go first, Baskin won
- They were so busy, that they did not have time to manage all of their stores
- They decided to sell their stores to their managers
- Were doing franchising before…
At what rate did B-R franchises expand?
- Factory in Burbank, made hundreds of new flavors a year, but only 8 or 9 made it to the stores
- At the end of 1949, they had 43 stores
- By 1960, 100
When did B-R sell their company, and what happened to the founders?
- When they had 500 stores, in 1967, they sold the company to United Fruit for $12 million
- Baskin died six months after selling company
- Mr. Robbins still worked for them for 11 years after sale of company
What are some unique facts about Irv Robbins?
- Backyard pool was shaped like an ice cream cone
- Became a lecturer on entrepreneurship at UCLA and …
- Ate a bowl of cereal with a scoop of banana ice cream for breakfast
Major factors in creating a business
- Name
- Location
- Type or kind of business
- Register entity with the state
- Tax info
- Mission statement/vision
- Business plan
Potential elements of a business plan
- Pricing and promotion strategy
- Marketing
- Company and product description
- Employees
- Startup costs/financing
- Expertise or knowledge needed
- SWOT analysis
- Competitive advantage analysis
- Slogan or titling
- Accounting
- Taxes
- Liability
What type of business entity?
• What issue should I think about? • BIG issue??? o Lawyer vs. accountant
Importance of a business name
- Name is really important
- Think BIG
- Think about tomorrow
- If you are successful, your choice will be with you for a long time
Benefits of choosing a business name
- Name may influence the growth of your business
- Business name automatically contains a marketing element
- Your business name should benefit your marketing
- Name can create different visual images
Dangers of choosing a business name
- A personal name could affect franchising
- Name can reveal origins of your business
- Don’t pigeonhole your business
- Descriptive terms can limit flexibility
Strategies for choosing a business name
- The “sound and spell test”
- How do you spell that?
- Need to be able to spell by only hearing it
- Think about domain names, and buy them
- Suck sites: “www.cocacolasucks.com”
Smak Parlour small business
- Clothing store
- Partnership
- www.smakparlour.com/pages/About-Us.html
Important points about partnerships
- Business partnerships are like marriages
- Trust and work ethic are vital ingredients
- Any partner that doesn’t pull their weight, will harm the partnership
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Strategies
- Define roles clearly
- Develop a written partnership agreement
- Define exit strategies
Blue Eden small business
- Small shop in NJ
- Expanded to airport kiosk
- Makes soaps from her grandmothers recipe
- Chose an LLC to avoid personal financial exposure
- Not interested in franchising because of reliance on local artists
- www.blueedenstoneharbor.com
Entity choices
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Sole proprietorship
- Funding
- What happens when the owner dies?
- The business entity ends
- An heir can take over the business as a new entity
LLC
- Hybrid
- Operating agreement
What are the owners of an LLC called?
- Members
Lost Dog Café
- …
- What would the original owners want to include in the franchise contract?
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Private Franchises
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Examples of franchises
- Distributorship
- …
- …
Franchises
- Franchisor
- Franchisee
Laws governing franchising
- More than one area
The franchise contract
- Important!
- …
Partnerships
- an association of two or more persons to carry on as co-owners a business for profit
- Created by agreements
- Governed by common law and statutory law
- See text UPA page 404
Partnership taxes
- Partnership has no tax L
- Partner’s profit is taxed as individual income to the partner
Major Forms of Businesses Compared
- See chart on page 465
Corporations – why Delaware?
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Corporations
- statutory requirements – creature of statute
- What law?
- a legal entity separate and distinct from its owners – can have perpetual existence.
- The shareholder-owners elect directors, who set policy and hire officers to run the day-to-day business of the corporation.
- Corp can have hundreds, thousands or even millions of shareholders
- Impact of death of shareholder
Corporations – the good and the bad
- Shareholders normally are not personally liable for the debts of the corporation.
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Taxes
- corporation taxed on net profits;
- shareholders taxed on disbursed dividends.
Corporations – the good and the bad
Classification of corporations
- Domestic
- Foreign
- Alien
Certificate of Authority
Certificate of Authority
The corporation is a legal entity distinct from its owners.
Liability?
The corporation is a legal entity distinct from its owners.
Liability?
What laws govern corporate formation?
What laws govern corporate formation?
How long can the corporation exist?
How long can the corporation exist?
Corporate personnel
- The shareholders own the corporation.
- They elect a board of directors to govern the corporation.
- The board of directors hires corporate officers and other employees to run the daily business of the firm.
Corporate Taxation
- Corporations taxed on net profits
- Shareholders taxed on dividends
- Known as double-taxation
Are shareholders of a corporation ever personally liable?
- Yes, shareholder(s) may be personally liable by “piercing the corporate veil”
- Very rare legal remedy
quorum
- the number of members of a decision making body that must be present before business can be transacted
proxy
- …
Stock certificate
- certificate issued by corp evidencing the ownership of a specified number of shares
Virginia State Corporation Commission
- Office of the Clerk webpage:
- Forms
- Entity search
- Entity formation
- Check name distinguishability
- Annual reports
- Forms
- www.scc.virginia.gov
Why is Delaware important to corporations?
- …
- Delaware Court of Chancery
- corp.delaware.gov
Who was Lilly Pulitzer?
- Opened an orange juice stand
- Needed an apron that would hide stains
- Instead, made a sleeveless dress with a citrus print
- Created a women’s fashion empire
- www.lillypulitzer.com
