Intro to Business - Chapter 4 - small business and entrepreneurship
S coporation
- a variation of a regular corporation; taxed as though it were a partnership with restrictions on shareholders - eliminates double taxation and retains the limited liability benefit - no more than 100 shareholders are allowed - must be a domestic corporation
making big businesses act "small"
- competitive economy has made companies to stay lean - downsizing (right-sizing) and entrepreneurs
small business (lists)
- employees less than 500 people - providing employment - providing technical innovation - providing competition - paying 42% of total US private payroll - one-third of firms survived 10 years or longer
entrepreneurial disadvantages
- ongoing worries about competition, employee problems, new equipment, expanding inventory, rent increases, or changing market demand -small business person is often the owner, manager, sales force, shipping and receiving clerk, bookkeeper, and custodian - multitasking can result in long hours for most owners - half of all small business fail within five years
factors for entrepreneurial success
- personal characteristics - culture of entrepreneurship - demographic change - advances in technology - making big businesses act "small"
conglomerate M&As
-the amalgamation of businesses that are in completely distinct and diversified markets
what are the 4 steps when starting a business
1. start with a concept or general idea 2. create a business plan 3. devise a strategy for planning and development 4. make decisions - form of ownership - financing acquiring existing business vs starting new
factors for high failure rate
1. undercapitalization 2. managerial inexperience or incompetence 3. inability to cope with growth
Partnership
A business in which two or more persons combine their assets and skills
preferred stock
A special type of stock whose owners, though not generally having a say in running the company, have a claim to profits before other stockholders do.
merger
Combination of two or more companies into a single firm
Advantages of a corporation
Limited liability Unlimited life Separation of ownership and management Transfer of ownership is easy Easier to raise capital
Disadvantages of Sole Proprietorship
Limited to life of owner Equity capital limited to owner's personal wealth Unlimited liability Difficult to sell ownership interest
vertical M&As
M&As of company for the integration
S corporation
corporation taxed as though it were a partnership with restrictions on shareholders
quasi-public corporation
corporations owned and operated by the federal, state, or local government
Disadvantages of a corporation
double taxation hostile takeover lack of freedom and secrecy
when forming a business, what are your financial options
equity financing debt financing
entrepreneurial advantages
flexibility focus reputation
focus
focus efforts on a precisely defined market niche (a specific group[ of customers)
Limited Liability Company
form of ownership p that provides limited liability and taxation like a partnership but places fewer restrictions on members
limited liability company
forms of ownership that provides that combines the benefits of a corporation and a partnership - avoids double taxation of a corporation - retains the corporations legal benefit of limited liability - not restricted to 100 stockholders - alien corporation
inability to cope with growth
growth owner to give up some direct authority
culture of entrepreneurship (Entrepreneurial success)
idea of entrepreneurship is respected and supported
Intrapreneurs
individuals in large firms who take responsibility for the development of innovations within the organizations
social entrepreneurship
individuals who use entrepreneurship to address social problems
personal characteristics (Entrepreneurial success)
intuitive, productive, resourceful, charismatic, innovative, risk taker, persistent, friendly
Managerial Inexperience or Incompetence
just because an entrepreneur has a brilliant vision, it does not mean he or she has the knowledge or experience to manage - poor implementation
venture capitalists
persons or organizations that agree to provide some funds for a new business in exchange for an ownership interest or stock
Dividends
profits of a corporation that are distributed in the form of cash payments to stockholders
advances in technology (Entrepreneurial success)
recent innovations have made technology more accessible and affordable to small businesses
Initial Public Offering (IPO)
selling a corporation's stock on public markets for the first time
stock
shares of a corporation that may be bought or sold
Horizontal M&As
similar products between the two
flexibility
small sizes allows flexibility and speed to adapt to changing market demands
Types of Ownership structure
sole proprietor partnership corporation S corporation Limited liability company
what are the forms of business ownership
sole proprietorship, partnership, corporation
common stock
stock whose owners have voting rights in the corporation, yet do not receive preferential treatment regarding dividends
franchiser
the company that sells a franchise
Undercapitalization
the lack of funds to operate a business normally - too many entrepreneurs think that all they need is the money to get started
equity financing
the owner uses real personal assets rather than borrowing funds from outside sources to get started in a new business - you can also obtain this by finding investors for their operations and selling stock in the business to family members, friends, employees or other investors
Entrepreneurship
the process of creating and managing a business to achieve desired objectives
Entrepreneurship (slides)
the process of creating and managing a business to achieve desired objectives - accelerating, and many new small business are emerging - social entrepreneurs
aquisition
the purchase of a company by another company, usually buying its stock
acquisition
the purchase of one company by another, usually by buying its stock
franchisee
the purchaser of a franchise
sharing economy
an economic model involving the sharing of underutilized resources
Small Business Administration (SBA)
an independent agency of the federal government that offers managerial and financial assistance to small businesses
cooperative (co-op)
an organization composed of individuals or small businesses that have banded together to reap the benefits of belonging to a larger organization
what are two ways you use your financial options and resources
angel investors venture capitalists
small business
any independently owned and operated business that is not dominant in its competitive area and does not employ more than 500 people
Advantages of Sole Proprietorship
Easiest to start Least regulated (freedom being your own boss) Single owner keeps all the profits Taxed once as personal income
debt financing
banks and the small business administration (SBA) - family and friends as sources for long term loans
sole proprietorships
businesses owned and operated by one individual; the most common form of business organization in the United States
reputation
can develop enviable reputation for quality and service
domestic corporation
conducting business in the state in which it is chartered
Alien Corporation
conducting business outside the nation in which it is incorporated
foreign corporation
conducting business outside the state in which it is chartered
Advantages of Partnership
Ease of start-up Availability of capital and credit Personal interest Combined business skills and knowledge Retention of profits No special taxes
closed (private) corporation
Stock is owned by relatively few people and not sold to public
Mergers
The joining together of two or more companies or organizations to form one larger one.
unlimited liability
The owner is personally and fully responsible for all losses and debts of the business
Disadvantages of Partnership
Unlimited liability General partnership Limited partnership Partnership dissolves when one partner dies or wishes to sell Difficult to transfer ownership
limited partnership
a business organization that has at least one general partner, who assumes unlimited liability, and at least one limited partner, whose liability is limited to his or her investment in the business
sole proprietorship
a business owned and managed by a single individual
private corporation
a corporation owned by just one or a few people who are closely involved in managing the business
nonprofit corporation
a corporation that does not seek to earn a profit and differs in several fundamental respects from C corporations
public corporation
a corporation whose stock anyone may buy, sell, or trade
board of directors
a group of individuals, elected by the stockholders to oversee the general operation of the corporation, who set the corporation's long-range objectives
corporate charter
a legal document that the state issues to a company based on information the company provides in the articles of incorporation
Corporation
a legal entity owned by individual stockholders
Corporation
a legal entity, created by the state, whose assets and liabilities are separate from its owners
franchise
a license to sell another's products or to use another's name in business, or both
General Partnership
a partnership that involves a complete sharing in both the management and the liability of the business
Entrepreneur
a person who starts a new business or organization, taking some personal financial risk to do so
the business plan
a precise statement of the business rationale and a step by step explanation of how it will achieve its goals
business plan
a precise statement of the rationale for a business and a step-by-step explanation of how it will achieve its goals
Leveraged Buyout (LBO)
a purchase in which a group of investors borrows money from banks and other institutions to acquire a company (or a division of one), using the assets of the purchased company to guarantee repayment of the loan
partnerships
a voluntary association of two or more persons to act as co-owners of a business for profit
