Chapter 8: Business Organizations
SECTION 2: PARTNERSHIPS
AND FRANCHISES
PARTNERSHIPS

A business organization that is
 Owned
by two or more people
 Responsibilities are split
 Profits are split
TYPES OF PARTNERSHIPS

General Partnership
 Most
common type of partnership
 Characteristics
 Share
responsibilities equally
 Share profits equally
 Share liability equally
UNLIMITED,
PERSONAL,
LIABILITY!
TYPES OF PARTNERSHIPS

Limited Partnership
 Characteristics
 Only
one partner runs the business
 Only one partner shoulders
UNLIMITED,
PERSONAL,
LIABILITY!
TYPES OF PARTNERSHIPS

Limited partnerships
 Characteristics
 Second*
partner’s role
Contribute money
 LIMITED liability – can only lose investment
 Collect share of profits

 Second
partner’s limitations
No say in how to run business
 “Silent Partner”

TYPES OF PARTNERSHIPS

Limited Partnership
 Partners
are not equal
 One must be the “general” partner
 Controls
the company
 UNLIMITED PERSONAL LIABILITY
 Splits the profits
 Other
 Put
partner(s)
up money
 Shares profits
 Has NO SAY / NO CONTROL
TYPES OF PARTNERSHIPS

Limited Liability Partnerships
 Similar
to General Partnership
 Partners are pretty much equal
 There is LIMITED liability
 Only
company assets are at risk
 Only partner’s assets are at risk if he or she makes the
mistake
 Only
certain types of companies can be “LLPs”
PARTNERSHIPS

Advantages
 Easy
and inexpensive
to establish
 Little government regulation
 More than one person contributes money and skills
 Can offer more fringe benefits
 Shared decision making
PARTNERSHIPS

Disadvantages
 Potential
conflict with partner(s)
 Unlimited liability (except LLPs)
 If your partner messes up and the company suffers,
you suffer too!
 Lack of permanence
PARTNERSHIPS
YOUR TURN:
1. Which one of the three forms of partnerships
do you think is best?
2. Why is it better than the
other two forms?
(Give at least TWO good reasons.)
FRANCHISES
SEMI-independent business
 Pays fees to parent company
 Gets rights to open a store
in a certain area

FRANCHISES

Advantages
1.
2.
3.
4.
5.
Training and support from the parent company
Standardized quality requirements attract
customers
Advertising benefits
Financial aid from parent company
Bulk buying benefits
FRANCHISES

Disadvantages
1.
Payments to mother company
a.
b.
2.
3.
4.
Fees to start the business
A portion of the profits (royalties)
Mother company sets strict standards
You MUST purchase from mother company or from
approved markets
Limited to selling only their products
FRANCHISES
YOUR TURN:
You investigate the idea of opening your own
franchise. (Sears Hardware Store?)
1.Which advantage(s) is/are most important to
consider? Why?
2.Which disadvantage(s) is/are most important to
consider? Why?
3.Do you do it?