Intro to Business Chapter 4 (Concepts to know)

Franchising Disadvantages

-lack of control over quality -inability to engage in global strategic coordination

Franchising Advantages

-proven business opportunity -access to management expertise

2 Types of Cooperatives - buyer & seller

A buyer cooperative is a group of cooperative members who unite for combined purchasing power. A seller cooperative is a group of individual producers who join together to compete more effectively with large producers (this is popular in agriculture.)

Frachisee vs Sole Proprietor

A frachisee is a person who sells the goods or services of the franchisor in a certain geographic area. A Sole Proprietor is a business that is established, owned, operated, and often financed by one person.

Cooperative

A legal entity typically formed by people with similar interests, such as suppliers or customers,to reduce costs and gain economic power. A cooperative has limited liability, an unlimited life span, an elected board of directors, and an administrative staff; all profits are distributed to the member-owners in proportion to their contributions.

Partnership

Advantages: Ease of formation, availability of capital, diversity skills/expertise, no special taxation, and freedom from government control. Disadvantages: Unlimited liability, Potential for conflicts between partners, Complexity of profit-sharing, and Difficulty exiting or dissolving a partnership. Other Characteristics: 2+ owners, may be more successful with more expertise, but there is also the potential for conflict b/w partners

Corporations

Advantages: Limited liability, Ease of transferring ownership, Unlimited life, Tax deductions, and ability to attract financing. Disadvantages: Double taxation's of profits, cost and complexity of formation and more government restriction. Other Characteristics: Capital is raised by selling shares of stock, Ownership is easily transferred (just have to sell your shares of stock if you no longer wish to be part-owner)

Sole Proprietorship

Advantages: remain small, and also are established, owned, operated, and often financed by one person. Disadvantages: unlimited liability, difficulty raising capital, limited managerial expertise, trouble finding qualified employees, personal time commitment, and unstable business life. Other Characteristics: Only 1 owner, the owner has total control of business decisions and can sell/close business very easily

Organization with the most profits?

Corporations

Organization with the most sales?

Corporations

General partnership vs Limited partnership -- what is the difference?

General Partnership: Partners who have unlimited liability for all of the firm's business obligations and who control its operations. Limited Partnership: Partners whose liability for the firm's business obligations is limited to the amount of their investment. They help to finance the business but do not participate in the firm's operations.

Horizontal vs Vertical Mergers -- purpose?

Horizontal -- reduce costs, expand product offerings (same industry, same stage) Vertical -- gain control over resources or gain access to different markets (same industry, different stage)

Limited vs Unlimited Liability -- what does it mean for an owner?

Limited Liability: Owners are not responsible for the companies debts or liabilities. Unlimited liability is the full legal responsibility that business owners and partners assume for all business debts.

LLC (Limited Liability Company)

Limited liability, pass through income taxation, flexibility

Be able to describe one trend (discussed in Lesson 4.7) that is affecting business organizations today or will in the future.

Many social, demographic, and economic factors affect how businesses organize. Throughout the world, cooperatives are providing members with credit and financial services, energy, consumer goods, affordable housing, telecommunications, and other services that would not otherwise be available to them.

Merger Vs. Acquisitions

Merger = 2 companies combining to form a new one Acquisition = 1 company buying out (purchasing) another company

What rights do stockholders have?

The owners of a corporation who hold shares of stock that carry certain rights.

Joint Venture

Two or more companies that form an alliance to pursue a specific project, usually for a specified time period.

S corporation

a form of corporation that avoids double taxation by having its income taxed as if it were a partnership

double taxation

feature of taxation that allows stockholders' dividends to be taxed both as corporate profit and as personal income

Most common type of Business Organization?

sole proprietorship: