We all may think we know what a business is, but the law allows for businesses to operate under a number of different types of business entities.For the most part, the business owner(s) can choose which type of entity they want to operate as, and there are pros and cons to the different types of entities depending on the nature of the business.It's important, then, to have a basic understanding of the different types of entities and how they operate.We will be discussing most of these entities in more detail throughout this Unit of study, but as a starting point, review the chart on page 491 of the textbook to familiarize yourself with the vast array of available entities.

1.Let's look first at a sole proprietorship.

a.How many owners are there in a sole proprietorship?

b.What is the owner's liability for the debts and torts of the business?

2.Let's turn now to partnerships :What is a partnership?

3.What formalities are required to form a partnership?

4.What is a limited partnership?

5.What is a corporation?

6.What is the difference in taxation between a partnershipand a corporation?

7.What is a S Corporation?

8.Assume that you are starting a business and are considering what type of entity to operate as - what factors should you consider in making that decision?

9.What is a Limited Liability Company?

10. What is the principal advantage of a LLC over a partnership?

You are all familiar with McDonalds, Subway, etc., and may be aware that these restaurants, like many other businesses, are examples of franchises.Let's take a little closer look at what franchising is all about.

11. What are the advantages of franchising to the franchisor (ie, McDonalds)?

12. What are the advantages to the franchisee (the owner of the local McDonalds)?

(NOTE:Questions 13-15are on the next page.)

13. Because of abusive practices by franchisors, Congress has passed federal legislation to prohibit these abuses.What are some of the basic provisions of the federal legislation?

14. Let's put you on a road trip where you are going through Anywhere, USA.You are hungry and would like to get a pizza, and, lo and behold, up ahead on opposite sides of the street you see a Pizza Hut and a place called (remember the test you just took) Pattie's Pizza Pub!Both are nice buildings, and both have cars out front indicating customers, which pizza place (sorry, I'm going to limit your options here) are you going to pick, and why?

15. I am going to guess that most of you have, at some point in your lives, had a job - tell me the type of business entity of your most recent employer.