Chapter 36 Flashcards
Entrepreneur
One who initiates and assumes the financial risks of a new enterprise and who undertakes to provide or control its management
Entrepreneurs consider
- Ease of creation
- Liability of the owners
- Tax considerations
- Ability to raise capital
Sole proprietorship
The simplest form of business, in which the owner is the business; the owner reports business income on his or her personal tax return and is legally responsible for all debts and obligations incurred by the business
- generally revenue is less than 1 million
Advantages of the sole proprietorship
Flexibility
Taxes
Disadvantages of the sole proprietorship
Personal liability
Personal assets at risk
Lack of continuity after death
Franchise
Any arrangement in which the owner of a trademark, trade name or copyright licenses another to use that trademark, trade name or copyright under specified conditions or limitations, in the selling of goods and services
Franchisee
One receiving a license to use another’s trademark, trade name or copyright in the sale of goods and services
Franchisor
The seller of the franchise
Types of franchises
Distributorship
Chain-style
Manufacturing arrangements
Distributorship
The franchisor liscenses a franchisee to sell its product
Ex: car dealerships and beer distributorships
Chain style business operation
A franchise operates under a franchisors trade name and is identified as a member of a select group of dealers that engage in the franchisors business
Ex: fast food, stores etc
Manufacturing arrangement
The franchisor transmits to the franchisee the essential ingredients or formula to make a particular product
Franchises are governed by
Contract law
Article 2 if sale of goods
The franchise rule
- Written disclosures
- Reasonable basis for any representations
- Projected earnings figures
- Actual data
- Explanation of terms
Who makes franchise laws
Both federal and state
- federal trade commission
