their owners can save or borrow, they usually lack the resources to develop into large-scale enterprises. The Business Partnership. One way to start or expand a venture is to create a partnership with two or more co-owners. Partnerships enable entrepreneurs to pool their talents; one partner may be qualified in production, while another may excel at marketing, for instance. Partnerships are exempt from most reporting requirements the government imposes on corporations, and they are taxed favorably compared with corporations. Partners pay taxes on their personal share of earnings, but their businesses are not taxed. States regulate the rights and duties of partnerships. Co-owners generally sign legal agreements specifying each partner's duties. Partnership agreements also may provide for "silent partners," who invest money in a business but do not take part in its management. A major disadvantage of partnerships is that each member is liable for all of a partnership's debts, and the action of any partner legally binds all the others. If one partner squanders money from the business, for instance, the others must share in paying the debt. Another major disadvantage can arise if partners have serious and constant disagreements. Franchising and Chain Stores. Successful small businesses sometimes grow through a practice known as franchising. In a typical franchising arrangement, a successful company authorizes an individual or small group of entrepreneurs to use its name and products in exchange for a percentage of the sales revenue. The founding company lends its marketing expertise and reputation, while the entrepreneur who is granted the franchise manages individual outlets and assumes most of the financial liabilities and risks associated with the expansion. While it is somewhat more expensive to get into the franchise business than to start an enterprise from scratch, franchises are less costly to operate and less likely to fail. That is partly because franchises can take advantage of economies of scale in advertising, distribution, and worker training. 44