CH 36: Small businesses and franchises

Starting a business

What to consider when forming a business
- ease of creation
- the liability of the owners
- tax consideration, and
- the ability to raise capital

Sole proprietorship

any individual who does business without any legal entity

popularity
size
- easy to set up
advantages
- tax credit
disadvantages
- liability

Franchises

any arrangement in which the owner of intellectual property such as trademark, a trade name, or a copy right licenses other to use it in the selling of goods or services

rights to other businesses
Types:
- distributorship
  - licenses a dealer (the franchisee) to sell its product
    - such as automobile dealerships or beer distributorships
- chain style business operations
  - operates under a franchisor’s trade name and is identified as a member of a select group of dealers that engage in the franchisor’s business
    - such as real estate brokerage firms ,tax-preparing services, or fast food chains
- manufacturing arrangement
  - the franchisor transmits to the franchisee the essential ingredients or formula to make a particular product
    - such as pepsi-cols or other soft drink bottle companies

Franchise law

goods → UCC (uniform commercial code)
federal regulation
- federal trade commission
franchise rule
- requirements
  - franchisors to disclose certain material facts that a prospective franchisee needs in order to make an informed decision