intro to business ch. 5-6

What are some of the factors to consider before buying a franchise?

Before buying a franchise be sure to check a company's (franchisor's) resources and reputation. There are many franchising scams. The checklist in this chapter gives advice about things to consider before buying a franchise.

What does the government do to promote entrepreneurship?

The government helps by creating enterprise and promise zones, offering tax breaks, enacting the JOBS Act (discussed further in Chapter 19), and "investor visas."

Why are so many new businesses choosing a limited liability company (LLC) form of ownership?

) Limited liability companies have become a popular way to form a business since all fifty states now recognize LLCs. Some of the advantages of LLCs are: Limited liability, choice of taxation (can be taxed as a partnership or corporation), flexible ownership rules, flexible distribution of profit and losses, operating flexibility.

What is a cooperative?

A cooperative is a form of business that is owned and controlled by the people who use it—producers, consumers, or workers with similar needs who pool their resources for mutual gain. Cooperatives are a major force in agriculture and other industries today.

What's the difference between a limited partner and a general partner?

A general partner is an owner who has unlimited liability and can be active in managing the firm. A limited partner is an owner who invests money in the business, but does not have any management responsibility or liability for losses beyond his or her investment.

What are the major advantages and disadvantages of incorporating a business?

Advantages of incorporating a business include: Limited liability, ability to raise more money for investment, size, perpetual life, ease of ownership change, ease of attracting talented employees, separation of ownership from management. Disadvantages of incorporating are: Initial cost, extensive paperwork, double taxation, two tax returns, size, difficulty to terminate, possible conflict with stockholders and board of directors.

What are some of the advantages small businesses have over large businesses in selling in global markets?

Small businesses have several advantages over large businesses in global markets. These include: (a) global buyers often enjoy dealing with individuals rather than with large corporate bureaucracies, (b) small companies can usually begin shipping much faster, (c) small companies can provide a wide variety of suppliers, and (d) mall companies can give global customers personal service and undivided attention because each overseas account is a major source of business for them.

What's the role of owners (stockholders) in the corporate hierarchy?

Stockholders do not have to be employees of the corporation. They are investors who have limited liability. Stockholders elect the board of directors of a company who select the management to control the company.

If you buy stock in a corporation and someone gets injured by one of the corporation's products, can you be sued? Why or why not?

Stockholders in a corporation have limited liability meaning as owners they are responsible for its losses only up to the amount they invested. The corporation could be sued and forced out-of-business but the stockholder would only lose what he/she invested.

What opportunities are available for starting a global franchise?

Successful franchising in global markets offers the same opportunities as in domestic markets. However, franchisors must be careful to adapt to the region where they wish to expand. McDonald's for example has more than 33,000 restaurants in 119 countries.

Most people who start businesses in the U.S. are sole proprietors. What are the advantages and disadvantages of sole proprietorships?

The primary advantages of sole proprietors are: Ease of starting and ending the business, being your own boss, pride of ownership. leaving a legacy, retention of company profits, no special taxes. Disadvantages include: Unlimited liability, limited financial resources, management difficulties, overwhelming time commitment, few fringe benefits, limited growth, limited life span.

Why are people willing to take the risks of entrepreneurship?

The primary reasons people are will to take the risk of entrepreneurship are: (a) opportunity to share in the American dream; (b) profit, the potential to become wealthy and successful; (c) independence, becoming you own boss; and (d) challenge, the desire to take a chance.

What are the advantages of entrepreneurial teams?

Whereas an entrepreneur has to wear many hats and take huge responsibility, a team allows members to combine creative skills with production and marketing skills right from the start. Having a team can also ensure more cooperation and coordination later among functions in the business.

Why would unlimited liability be considered a major drawback to sole proprietorships?

With unlimited liability, the sole proprietor is liable for all debts and obligations of the business and must pay them even if it means selling your home, car, or whatever else you own.

How do micropreneurs differ from other entrepreneurs?

) Most entrepreneurs are committed to the quest for growth in their business. Mircorpreneurs know they can be content even if their companies never appear on a list of top-ranked businesses. Many micropreneurs are home-based businesses.

Why do many small businesses avoid doing business globally?

Key reasons why many small businesses avoid doing business overseas include: (a) financing is often difficult to find, (b) would-be exporters don't know how to get started and do not understand the cultural differences between markets, and (c) the bureaucratic paperwork can threaten to bury a small business.

What are some of the advantages and disadvantages of partnerships?

Some of the advantages of partnerships are: More financial resources, shared management and pooled/complementary skills and knowledge, longer survival, no special taxes. Disadvantages of partnerships include: Unlimited liability (for general partners), division of profits, disagreements among partners, difficulty of termination.