Week 4 — Choosing a Legal Form: Ownership, Franchising & Mergers

Welcome to your Week 4 Start Here page.

Why this matters

Whether you paint houses on your own or open a food stall with a friend, the legal form decides who owns the business and whose savings are on the line if it fails.

In plain language

Every business has to pick a legal form, and that choice decides who owns it and whose savings are at risk if it fails. A sole proprietorship (a business with one owner who answers personally for its debts) is the easiest to start, while a corporation (a business the law treats as a person of its own) protects its owners' personal savings. A franchise (a deal to run an outlet under someone else's brand) is a way to start without building a brand from scratch. Companies also combine, and you can sort those deals into three types. By the end you can compare the forms for the coffee cart and say, in dollars, what its owner could lose under each one.

• Already covered: Week 3, From Idea to Plan, built the cart's funding plan and its loan.
• This week: the forms of ownership, the LLC, franchising, and mergers.
• How they connect: the form decides who is on the hook for that loan.
• Where we're going next: Week 5, What the Business Owes.

Focus

Which legal form should carry a business, and who stands behind its debts?

By the end of this module, you should be able to:

• [ ] compare the forms by who owns and who is liable
• [ ] compute an owner's worst-case exposure
• [ ] explain what a franchisee buys and never owns
• [ ] sort a merger as horizontal, vertical, or conglomerate

To-do

Plan your week

1. Read Chapter 4 (about 35 minutes), then the lecture and slides.
2. Work the lecture tutorial (60–90 minutes) and the practice set (about 20 minutes).
3. Do the Business Case Workshop (about 90 minutes), the discussion, and the assignment.
4. Take the quiz.

This week's checkpoint: compute the cart owner's worst-case exposure as a sole proprietor and as an LLC, and say what the shield removes.

You've got this

Take it in order, and ask your instructor if a step snags.

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