Entrepreneurship: From Start-Up to Growth

The Clayton Act

Prohibits exclusive dealing, tying contracts, and interlocking directorates.

What are the three main factors addressed in a business plan?

goals, plans, and metrics for success

4 antitrust laws

1. The Sherman Antitrust Act 2. The Clayton Act 3. The Federal Trade Commission Act 4. The Robison-Patman Act

Which amounts could be considered "microloans"? More than one answer may be correct.

$6,000 $26,000

Financial Institutions

Banks, savings and loans, and credit unions

International Law

Laws that govern activities between nations

Each supplier of a company receives a written contract spelling out all the terms of their business relationship. Both the company and the supplier sign the contract, which indicates their acceptance of the the terms. Which condition of contract law does this describe?

agreement

3 types of bankruptcy

- Chapter 7 - Chapter 11 - Chapter 13

The difference between a franchisee and a franchisor is that the franchisee ______ a franchise.

buys

aquisition

occurs when one company buys another one

merger

occurs when two firms join to form a new firm

leveraged-buyouts (LBO)

one firm borrows money to buy another firm. The purchaser uses the assets of the company being acquired as security for the loan.

What type of law covers legally enforceable agreements between private parties?

contract

Randy needs to obtain a loan to support the business. In his business plan, Randy should classify the loan within which section?

financing

taxes

used to pay for public services and to discourage or encourage certain behavior

What are examples of external expansion in a business? More than one answer may be correct.

-Acquiring another company -Merging with another company

Franchisor

-Gives permission to distribute its products -Allows others to manufacture or make its products

Some characteristics of entrepreneurs are:

-self-confident and belief in personal control -need for achievement and action orientation -tolerance for ambiguity and risk -energy levels

You read a corporate notice that says your company is going to acquire another business that has different strengths that expand your company's strengths. The notice also says that your company's leaders are optimistic about performance improving greatly as a result of this buy. What is the reason for this acquisition?

Acquiring to have a capability without having to develop it

Which businesses need to write business plans?

All businesses should write business plans to create a framework for success.

Chapter 11 Bankruptcy

Allows companies to reorganize and continue business operations while paying creditors a portion of their debts.

Merger examples

Bert and Ernie come together to form a new company. Exxon and Mobil join to become ExxonMobil.

Which of the following is not an organization from which Randy should consider seeking advice and resources?

Better Business Bureau

Acquisition examples

Company A buys Company B. Amazon purchases Whole Foods. Verizon Communications buys Verizon Wireless

Darren decides to start his pizza business by purchasing a franchise from a larger chain. Which of the following is NOT an advantage Darren will likely experience?

Darren will have the freedom to create his own pizza style.

Chapter 7 Bankruptcy

Forces debtors to turn over assets to a trustee for division among creditors.

income tax

Paid on earnings received by individuals and businesses

You run your business in Illinois. The state passes a law that all companies must charge an 8% sales tax on every product they sell. Which type of law is this?

Statutory

Bankruptcy

The legal means of relief for debtors unable to pay their debt, may be voluntary or involuntary.

The failure or refusal of a party to a contract to live up to the promises made is called a ____________ of contract

breech

What is an advantage of a partnership?

fairly simple taxes

Randy realizes that there is a national company that provides spray foam insulation for roofing, and that for a license fee, he can use the national company's logo, methods, advertising, and products. In considering purchasing the license, Randy is considering operating as a(n)

franchise

In a _____________ partnership, two or more partners run the business and both have full financial and managerial liability.

general

A business owned and operated by two or more persons as a voluntary legal association is called a(n)

partnership

The Robison-Patman Act

prohibits price discrimination

entrepreneurship

the process of taking risks to try to create a new business

Why should Mary Ann and Nana create a business plan?

to provide an overall road map of how to start the business and to attract/satisfy investors

Wrongful injuries in business relationships not covered by contract or criminal law are covered by

tort

Intangible Personal Property

written documentation

What is an advantage of sole proprietorship?

you can start the business easily

small business

-Independently owned and operated -is not dominant in its field of operation -meets certain criteria set by the SBA for number of employees and annual sales revenue

Tips for keeping a small business healthy:

-Keep good records, and know when to ask for help -stay in tune with your customers -learn how to manage employees

The Basics of business law:

-Many legal disputes find their remedies in contract law, tort laws, and property laws -contract law -tort law -property law

Franchisee

-Purchases a franchise -Buys the right to sell a business's products

3 steps to gain insight into the business and market:

-Read about business and your prospective business -talk to knowledgeable people -get experience

2 reasons to purchase an existing business:

-To reduce uncertainty -To generate profits more quickly

Possible opportunities for earning money from home include:

-clothing boutiques -interior decorators -website developers -web-based stores -freelance work -direct sales -customer service -transcription service -tutoring

A comprehensive business plan includes these 7 components:

1. Executive summary 2. Introduction 3. Marketing 4. Manufacturing 5. Management 6. Legal 7. Financing

There are 4 types of entrepreneurs:

1. Intrapreneur 2. Entrepreneurial Team 3. Micropreneur 4. Solopreneur

Business law, the legal framework in which business is conducted, is composed of four major types of laws:

1. Statutory law 2. Common law 3. Administrative law 4. International law

4 property law categories:

1. tangible real property 2. tangible personal property 3. intangible personal property 4. intellectual property

How many workers do the majority of small businesses employ?

100 or fewer

To be legally enforceable, a contract must meet each of ______ conditions.

6

What is the definition of a master limited partnership (MLP)?

A partnership that acts like a corporation, selling stock on a stock exchange, but is taxed like a partnership, paying a lower rate than the corporate income tax

franchisee

A person who buys a franchise

Chapter 13 Bankruptcy

Allows individuals and small businesses with debt below a certain amount to repay their creditors over a period of time under a court-approved plan.

What benefits may entrepreneurs expect when they buy an existing business?

Already-developed resources Less work than starting from scratch

What should you keep in mind when deciding whether or not to purchase an existing small business?

An existing business is likely to come with a location and customer base.

Which of the following does not represent a reason that the pizza business is a new opportunity for entrepreneurs?

As pizza continues to rise in popularity, entrepreneurs can open more stores.

Vertical

Both companies are from the same industry but each performs a different activity

conglomerate

Both companies are in different industries and each performs different activities

Which of these would be most helpful in getting financing and thinking through important details about your business idea?

Creating a business plan

Difficulty hiring and keeping good employees

Destinee loses workers to other companies who offer better benefits

The Federal Trade Commission Act

Established the Federal Trade Commission (FTC) to define and restrict unfair competition.

Incubator

Iis a facility that offers small businesses low-cost offices with basic services, such as secretarial and accounting services and legal advice. Some incubators are sponsored by state and local economic development departments.

Angel investors and venture capitalists

Individuals and companies who invest in new enterprises

Which are types of torts covered by tort law?

Intentional Negligence

What does contract law apply to?

Legally enforceable agreements between private parties

In which partnerships do some partners have partial financial liability?

Limited liability partnerships (LLP) Limited partnerships

What are ways to alter a product to create a new business idea?

Make it less expensively. Combine it with another product. Adapt it to a new market.

Lack of financial support

Marcel owns a clothing store shop that sells designer clothes but has no savings on hand to weather an economic downturn

Agressive competition

Nicolette notices that another yoga studio has opened down the block from hers and that it offers longer hours and cheaper classes.

What are low-risk ways for entrepreneurs to keep their business afloat before it becomes profitable or during hard times? More than one answer may be correct.

Online fundraising Receiving a microloan from a sympathetic organization like Prosper.com Working a second job

Property Law

Property, or anything of value for which a person or firm has right of ownership

Administrative Law

Rules and regulations made by administrative agencies at all levels of government

Which funding sources are most likely to be based on personal finances? More than one answer may be correct.

Second mortgage Loan from a friend

What factors are outlined in a business plan?

Strategies to achieve goals Business goals Standards of success

What are common ways that entrepreneurs personally finance their new enterprise? More than one answer may be correct.

Taking out a second mortgage Maxing out credit cards Using savings

Which sources of funding are risks that may cause entrepreneurs to lose some of their personal money? More than one answer may be correct.

Taking out a second mortgage Maxing out personal credit cards

Inadequate managing skills

Tanya opens a restaurant despite the fact that she has never worked at a restaurant.

What are property taxes?

Taxes paid on real estate owned by individuals and businesses

What are reasons that acquisitions and mergers occur? More than one answer may be correct.

To reduce taxes To save money by consolidating operations To acquire managerial talent

What are disadvantages of sole proprietorship? More than one answer may be correct.

Unlimited financial liability Inability to sell the business

After Hurricane Sandy devastated the area where Wilson ran his business, Wilson moved his outdoor program indoors, which prompted him to move to annual memberships. Why did he make this decision?

Wilson's overall business expenses increased and he needed a way to cover the costs, which included investing in more marketing, equipment, space, and staff.

What are disadvantages of partnerships? More than one answer may be correct.

Working closely with partners you may disagree with Unlimited financial liability

Statutory law

Written laws (statutes) creative legislative bodies

employee buyout

a firm's employees borrow money against their own assets, such as their houses or their pension funds, to purchase the firm from its present owners. The employees then become the new owners of the firm.

While pursuing debt financing, Randy is asked to create a business plan. Which of the following is not likely to be included in the business plan?

a list of past failures of the entrepreneur

value added tax (VAT)

also known as a goods and services tax, a value-added tax is a type of national sales tax—a consumption tax that is levied at each stage of production based on the "value added" to the product at that stage

What is the term that describes when one company buys another company?

an acquisition

Franchise

an arrangement in which a business owner allows others the right to use its name and sell its goods or services within a specific geographical area.

Darren is preparing to graduate college and has dreams of opening a pizza chain focused on healthy ingredients. Darren has no money, few possessions, little credit, and does not have family members in a position to loan him money. Darren should try to fund his business through

angel investors or venture capitalists.

Entrepreneurs

business owners who see a new opportunity for a product or service and start a firm.

What term is used to describe a document that outlines a new company's business goals, a strategy for how the goals will be achieved, and how success will be measured?

business plan

A business client who is a child or who is an adult who suffers from a disease such as Alzheimer's would not be able to enter a contract with you because of which of the following conditions under contract law?

capacity

consumer-protection laws

concerned with protecting buyers' rights

intellectual property

creations of the mind that are further classified into copyrights, trademarks, and patents

The section of the business plan that is designed to initially captivate and energize a potential financial investor would be the

executive summary

JCF Health and Fitness was born of wanting to give women a solution to a traditional gym setting. Which aspect of a successful business does this scenario illustrate?

fulfilling a need

In what type of partnership do two partners share all of the responsibilities, profits, and liabilities?

general

3 types of mergers

horizontal, vertical, conglomerate

You must pay taxes to the government based on how much money you earn in a year. What kind of tax are you paying?

income

Small businesses are defined as entities that are ______.

independently owned and operated

A new law is established that limits the number of imports from a certain trade bloc to your country. Which type of law is this?

international

Papa John's strategy to pursue breakfast pizza is an example of

intrapreneurship.

antitrust laws

is designed to keep markets competitive by deterring big businesses from driving out small competitors

tangible real property

land and its attachments

In a ___________ partnership, there are partners who have an investment in the firm but do not have managerial responsibility or financial liability.

limited

In what type of partnership are there partners who have invested in the partnership but have no financial liability or managerial responsibility?

limited

Ted is a partner at a business. Although he has invested in the business, he has no managerial responsibilities or financial liability. What kind of partnership is Ted a part of?

limited

Randy worries that unforeseen early business experiences will cause the business to fail due to undercapitalization. Randy should consider acquiring a(n)

line of credit.

Which section of the business plan details and outlines the authority structure that exists inside the company?

management plan

A partnership that acts like a corporation, selling stock on a stock exchange, but is taxed like a partnership, paying a lower rate than the corporate income tax, is known as a(n) ____________ limited partnership.

master (MLP)

A ____________ occurs when two companies join to form a new company.

merger

A company can grow or expand in two ways, through a _______________ or ______________.

merger; acquisition

What is the term for a business started by two people using a legal agreement in which each person brings financial resources and managerial expertise to the business but the business cannot act as a single entity?

partnership

You are a clothing store owner, and your customers must pay a tax on every piece of clothing they buy. What kind of tax are the customers paying?

sales

Wilson states, "Culture is important to me. Our culture is based on accountability, camaraderie, and results. I've moved from finding the best person for the job to finding the best fit for our culture." Which attribute of a successful entrepreneur does this represent?

self-nurturing

Businesses with fewer than 100 to 500 employees are known as ________ businesses.

small

A _______ proprietorship is a business owned and typically managed by one person.

sole

forms of business ownership:

sole proprietorship, partnership, corporation

A charge used to pay for public services and to discourage or encourage certain behavior is known as a(n)

tax

Business-format franchise

It uses the franchisor's trade name and format, following guidelines for marketing and pricing the product.

Supplier and Barter Arrangements

Short-term credit, extended-payment plans, and barter arrangements

Small Business Administration-backed loaned

U.S. government assistance in financing, management training, and support in securing government contracts

Your parents agree to lend you $10,000 to help you with your new business, and you tell them that you will pay them back in the future. What is your source of funding in this scenario?

family and friends

Tips for taking over a successful business:

-Barter for supplies and services -Get a free conference call number through a service such as freeconferencecall.com -Obtain inexpensive website, hosting, blogging, and customer-contact services -Purchase inexpensive business cards and printing materials through web-based printing companies

3 different types of franchises:

-Business-format franchise -Product distribution franchise -Manufacturing franchise

Reasons Small Businesses Fail

-Inadequate business -lack of experience -difficulty hiring and keeping good employees -agressive competition -government paperwork

horizontal merger

Both companies are from the same industry and perform the same tasks

Jacob is an entrepreneur looking for his next big business idea. What are ways he can generate new ideas?

Combine two existing products into one new product. Find an existing product and make it less expensive to produce. Select a feature of an existing product to create a spin-off.

Manufacturing franchise

It has the right to manufacture and distribute a certain product, following a formula or using supplies purchased from the franchisor.

product distribution franchise (distributorship)

It has the right to sell trademarked products purchased from the franchisor.

Enterprise Zone

It is a specific geographic area in which government tries to attract business investment by offering lower taxes and other government support. Some are known as urban enterprise zones because they are located in economically distressed areas in the industrial or commercial parts of cities.

Anthony opens a taco shop on the same street as another taco shop, a burrito stand, and a sit-down Mexican restaurant. He knows that his food is good, but he is worried that the interior of his small shop is unattractive. He would love to put a fresh coat of paint on the walls and generally make the place look better to entice customers to come inside. But his family and friends will not loan him money, his suppliers have refused to extend him a line of short-term credit, and his bank wants him to put his motorcycle up for collateral, which he does not want to do. Which of these are likely to cause Anthony's business to fail? More than one answer may be correct.

Lack of financial support Aggressive competition

Common law

Laws made by judges ruling on cases brought before them and based on precedents, the decisions judges made in similar past court cases, which become guides to handling new cases.

Which statement about loans from family and friends is true?

Loans from family and friends should be documented in writing.

Government paperwork

Marta wants to apply for a permit to sell alcohol at her cafe, but she is having a hard time understanding the liquor license permitting process.

The Sherman Antitrust Act

Prohibits restraint of trade and monopolies

Which is a true statement about sole proprietorships?

They are owned and usually managed by one person.

What influence do small businesses have on corporate downsizing in the United States?

They help to offset the effects of corporate downsizing.

Which of these statements are true about the importance of small businesses to the U.S. economy?

They represent the majority of sales in the United States. They provide a large number of jobs.

Excise tax

This is based on the value of services or property other than real estate, such as airline tickets, gasoline, and firearms.

Sales tax

This is collected by retail merchants on the merchandise they sell and are usually set as a percentage of the item's price.

property tax

This is paid on real estate owned by individuals and businesses, as well as on certain kinds of personal property

Contract Law

To be legally enforceable, a contract must meet each of the six conditions that include agreement, consent, capacity, consideration, legality, and proper form.

What are reasons for writing a business plan? More than one answer may be correct.

To work out the specifics To gain financial backing

Tort Law

Tort law applies to wrongful injuries in business relationships not covered by contract or criminal law.

Benefits of franchises:

You may be able to: • own your own business and be your own boss. • start your new enterprise with widespread or growing name recognition. • follow someone else's proven formula for doing business, which is responsible for the brand's success to date. • receive marketing support. • receive management and financial support from the franchisor.

Drawbacks of franchises:

You may: • need to come up with a large initial franchise fee and other start-up costs. • need to share your sales with the franchisor. • have to endure the franchisor's micromanagement. • have to deal with the franchisor's shifty practices. • be disappointed in the payoff of your franchise.

One reason NOT to write a business plan is to keep important company strategies from ______.

being duplicated by competitors

tangible personal property

movable physical objects

Many home-based business are...

one or two person operated

franchisor

the business owner that gives others the right to sell its products and services