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Lecture Hospitality financial management: Chapter 11 - DeFranco, Lattin

Chapter 11 tackles crafting and negotiating the deal where authors elucidate how to finance a new business venture. The topics covered in this chapter include the new business venture, the business entity, the debt-equity mix, negotiating loans, negotiating equity investment and negotiating skills. | Chapter 11 Crafting and Negotiating the Deal Copyright © 2007 by John Wiley & Sons, Inc. All rights reserved Chapter Overview The Business Entity The Debt-Equity Mix Negotiating Loans Negotiating the Equity Investment Copyright © 2007 by John Wiley & Sons, Inc. All rights reserved Business Entity Selection Key issues to consider: The ability to easily add outside investors Liability protection Tax advantages Management control Copyright © 2007 by John Wiley & Sons, Inc. All rights reserved Sole Proprietorship Only one owner Advantages Disadvantages Simple and inexpensive to form Unlimited liability Flexible Responsible for all losses Freedom to make decisions Expertise of only one individual Freedom to make changes Resources of only one individual No red tape or bureaucracy Limited life Keep all profits Profits are not taxed twice Copyright © 2007 by John Wiley & Sons, Inc. All rights reserved Partnership Formed when two or more persons or entities come together as co-owners of a business A partnership is a legal entity that can own property, borrow money, and take actions just as individuals A partnership can sue or be sued Copyright © 2007 by John Wiley & Sons, Inc. All rights reserved Types of Partnerships General Partnership Unlimited personal liability Mutual agency allows one partner to act on behalf of the entire partnership Limited Partnership Protects limited partners from personal legal liability Limits the ability of limited partners to participate in the management of the business Copyright © 2007 by John Wiley & Sons, Inc. All rights reserved Partnership Advantages and Disadvantages Advantages Relatively easy to establish Limited partners have limited liability Profits are not taxed twice Relative flexibility in decision making Low level of bureaucracy and red tape Share resources and expertise with partners Disadvantages Limited life General partners have unlimited liability One partner can obligate the entire partnership Copyright © 2007 by John . | Chapter 11 Crafting and Negotiating the Deal Copyright © 2007 by John Wiley & Sons, Inc. All rights reserved Chapter Overview The Business Entity The Debt-Equity Mix Negotiating Loans Negotiating the Equity Investment Copyright © 2007 by John Wiley & Sons, Inc. All rights reserved Business Entity Selection Key issues to consider: The ability to easily add outside investors Liability protection Tax advantages Management control Copyright © 2007 by John Wiley & Sons, Inc. All rights reserved Sole Proprietorship Only one owner Advantages Disadvantages Simple and inexpensive to form Unlimited liability Flexible Responsible for all losses Freedom to make decisions Expertise of only one individual Freedom to make changes Resources of only one individual No red tape or bureaucracy Limited life Keep all profits Profits are not taxed twice Copyright © 2007 by John Wiley & Sons, Inc. All rights reserved Partnership Formed when two or more persons or entities come together as co-owners of a .