Exam 2
Small business administration (SBA)
Privately owned firms that provide venture capital to small enterprises that meet their investment standards; helps provide grants for you to help start a business
Trade association role in ethics
Provide ethical guidelines for their members Ensure codes do not contain provisions that may run afoul of antitrust levels
importance of small business
Providing technical Innovation ex.) air conditions, insulin, instant cameras, airplanes Providing employment Providing competition Filling the needs of society and other business
Debt Financing
Requires the entrepreneur to repay the invested amount at a later date
Small business Disadvanatge
Risk of failure Limited potential Limited ability to raise capital 3 sources of funding Angle investors Venture capitalists Crowdfunding
Financial plan
Summary of the investment needed, sales and cash flow forecasts, breakeven analysis, and sources of funding.
Appendix
Supplementary information crucial to the plan, such as résumés of owners and principal managers, advertising samples, organization chart, and any related information.
Corporation C Corp
Technically a separate entity under the lawn artificial person Can be public (open) or private (closed) An artificial person, created by law with most of the legal rights of a real pension such as: The right ro state & operate a business, to buy or sell property, borrow money, to sue or be sued, ro enter into binding contacts Only exists on paper
Limited Partners (LPs) Advantage
Technically, limited involvement with other partners Help with funding Easy tax filing Partners keep all profits Limited Liability, if formed properly
Franchisee Disadvantages
The amount of control retained by the franchisor The franchisor contract can dictate all aspects of the business Ex.) All Burger King fries taste the same because the franchisees have to make them the same way Franchisors opening competing franchises within the franchisee's market
Company & industry
The background of the company, choice of the legal business form, information on the products or services to be offered, and examination of the potential customers, current competitors, and the business's future.
Deciding factors on where to incorporate
The cost of incorporating in one state compared with the cost in another state The advantages and disadvantages of each state's corporate laws and tax structure
Small-Business development Center (SBCCs)
University-based groups that provide individual counseling qand practical training to owners of small businesses Draws resources from local, state, and federal governments, private businesses, and universities Provide managerial and technical help, data from research studies, and other types of specialized assistance of value
Hard-Core Unemployed
Workers with little education or vocational training and a long history of unemployment
Limited Partnership vs LLP
_______must have at least one general partner that has unlimited liability ______ may have limited liability for the malpractice & negligence of the other partners
Business plan
a carefully constructed guide for starting a business
Alien Corporation
a corporation charted by a foreign government and conducting business in the US ex.) toyota, royal dutch shell
Foreign Corportation
a corporation in any state in which it does business except the one in which is incorporated ex.) home depot is domestic to delaware in other states it foreign
Domestic Corporation
a corporation in the state on which it is incorporated
Closed corporation
a corporation whose stock is owned by relatively few people ans is not sold to the general public ex.) mars
Small Business Administration (SBA)
a government agency that assists, counsels, and protects the interest of small businesses in the United States
Equal Employment Opportunity Commission (EEOC)
a government agency with the power to investigate complaints of employment discrimination and the power to sue firms that practice it
Code of ethics
a guide to acceptable and ethical behavior as defined by the organization Outlines uniform policies, standards, and punishment for violations (companies roles in ethics)
Unlimited Liability
a legal concept that holds a business owner personally responsible for all the debts of the business (biggest single disadvantage) if the business has debts to pay the court system can go past the business assets into personal assets to pay back debts
Proxy
a legal form listing issues to be decided at a stockholders' meeting and enabling stockholders to transfer their voting rights to some other individual or individuals
Horizontal Merger
a merger between firms that make and sell similar products or services in similar markets
Vertical mergers
a merger between firms that operate at different but related levels in the production and marketing of a product
Stock Holders
a person who owns a corporation's stock
Affirmative Action Program
a plan designed to increase the number of employees from underrepresented groups at all levels within an organization
Hostile Takeover
a situation in which the management and board of directors of a firm targeted for acquisition disapprove of the merger
Syndicate
a temporary association of individuals or firms organized to perform a specific task that requires a large amount of money
Corporate citizenship
adopting a strategic approach to fulfilling economic, ethical, environmental, and social responsibilities Requires balancing the needs, desires, and demands of a diverse group of stakeholders including investors, employees, customers, regulators, competitors, neighborhoods and communities, and social activist
Consumerism
all activities are undertaken to protect the rights of consumers
Joint Venture
an agreement between two or more groups to form a business entity in order to achieve a specific goal or to operate for a specific period of time
Small Business
an independent business with fewer than 500 employees, depending on its industry
The right to be chosen
consumers must be given a choice of products, offered by different manufacturers and sellers, to satisfy a particular need
Types of industries
distribution, service, production
SBA Management Assistance
emphasizes on improving the management ability of the owners and managers of small business Includes free individual consueling, courses, conferences, workshops, and wide range of publications Provides management and technical assistance Managemnet Coruces and Workshops: covers all functions, duies, and roles of mangers Courses incldue Entrepreneurship, Starting and Managing Your Own Business, Developing a Business Plan, Managing the Digital Enterprise, Identify Your Target Market, and Analyze Profitability.
Franchisor Advantages
gains fast and well-controlled distribution of its products without incurring the high cost of constructing and operating its own outlet Has more capital available to expand production and use advertising Can ensure through the franchise agreement that outlets are maintained and operated according to its own standards Benefits from the fact that franchisee is likely to be very highly motivated to succeed, which translates into more sales and thus higher royalties for the franchisor
Ethical Communication
how do I positions thing in an ethical way so I am not misleading people
Limited Liability
if the business owes debts can only go to the thing in the business assets and not get your personal assets
Articles of incorporation
includes he firm name/ address The incorporator's name/ address The purpose of the corporation The max. Amount of stock and types of stock to be issued The length of time the corporation is to exist The name/ address of the corporation's registered agent
Major Forces in Consumerism
individual consumer advocates and organizations, consumer education programs, and consumer
level of ethical behavior
individual factors, social factors, opportunity
Distribution Industries
industries concerned with the movement of goods from producers to consumers includes retailing, wholesaling, transportation, and communication
Whistle-blowing
informing the press or government officials about unethical practices within one's organization The sarbanes-oxley Act of 2002 protects whistle-blowers who report corporate misconduct Federal employees who report wrongdoing are protected by the Whistleblower Protection Act of 1989
Busness plan comments
introduction, executive summary, benefits to community, company & industry, management team, manufacturing & operation plan, labor force, marketing plan, financial plan, existing strategy, critical risk & assumption, appedeix
Equity Financing
involves raising funds by promising inversors a share of future profits and an ownership stake in the business
SBA Publication
issues management, marketing, and technical publications dealing with hundreds of topics of interest to current and prospective managers of small firms that are free of charge
Plagiarism
knowingly taking someone else's words, ideas, or other original material without acknowledging the source
C Corp Advantages
limited liability, Easy to raise money/ capital Easy to transfer ownership Perpetual Life Withdrawal, death, or incompetence does not terminate corporation Specialized Management
The right to be informed
means that consumers must have access to complete information about a product before they buy it
The right to be heard
means that someone will listen and take appropriate action when customers complain
Venture capital
money that is incestedin small (and sometimes struggling) firms that have the potential to become successful
Open Corporations
one whose stock can be brought and sold by any individual ex.) General Electric, Microsoft, apple, Nike
Angle investors
people who donate to you by you back them back' private individuals who invest money in exchange for ownership in the company
SBA Financial Assistance
primary function to guarantee loans to eligible business Offer help to cover after natural distaners and economic crisis Microloan program: provides loans to help small business start and expand
Sarbanes-Oxley Act of 2002
provides sweeping legal protection for employees who report corporate misconduct (Government Role in Encouraging Ethics)
Wholealster
purchase products in quantity from manufacturers and then resell them to retailers
Articles of partnership
refers to an agreement listing and explaining the of the partnership Should include: Name of people/ business address Nature of business Duties of each partner Investments each partner invests Salary of each partner/ how profits & losses will be divided What will happen if a partner dies or wants to end the partnership Articles of partnership: refers to an agreement listing and explaining the of the partnership Should include: Name of people/ business address Nature of business Duties of each partner Investments each partner invests Salary of each partner/ how profits & losses will be divided What will happen if a partner dies or wants to end the partnership
Opportunity
refers to the amount of freedom an organization affords an employee to behave unethically if he or she makes that choice Eliminate opportunity for people to make good or bad decisions
Acquisition
same as a merger but used to reference to a large corporation's purchase of another corporation
Preferred Stock
stock owned by individuals or firms who usually do not have voting rights but whose claims on dividends are paid before those of common stock owners
Franchising
the actual granting the license
Business ethics
the application of moral standards to business situations
Corporate Officers
the chairperson of the board, president, executive vice presidents, corporate secretary, treasurer, and any other top executive appointed by the board of directors Help board make plans, carry out strategies, hire employees, and manage day-to-day business operations monthly report to board of directors
Merger
the combining of 2 corporations or other business entities to form one business
Socioeconomic model of social responsibility
the concept that business should emphasize not only profit but also the impact of its decisions on society
Double Taxation
the corporation has the pay taxes on profits made and the shareholder has to pay taxes on the buildings
Entrepreneurial Spirit
the desire to create a new business
Common Stock
the most basic form of corporate ownership and whose owners may vote on corporate policies Generally has one vote per share owned
Limited liability partnership (LLP)
the partner may have limited liability protection from legal action resulting from the malpractice or negligence of the other partner Some states restrict this type to accountants, architects, attorneys, etc.
Franchisee
the person or organization purchasing the franchise Supplies labor, capital, operayes the franchised business, and agrees to abide by the provisions of the franchise agreement Franchisee Rights Use of trademarks, trade names, and patents of the franchisor; Use of the brand image and the design and decor of the premises developed by the franchisor; Use of the franchisor's secret methods; Use of the franchisor's copyrighted materials; Use of recipes, formulae, specifications, processes, and methods of manufacture developed by the franchisor; Conducting the franchised business upon or from the agreed premises strictly in accordance with the franchisor's methods and subject to the franchisor's directions Guidelines established by the franchisor regarding exclusive territorial rights; and Rights to obtain supplies from nominated suppliers at special prices
Consumers' right to safety
the product they purchase must be safe for their intended use, must include thorough and explicit directions for proper use, and must be tested by manufacturers to ensure product quality and reliability
Social responsibility
the recognition that business activities have an impact on society and the consideration of that impact in business decision-making
Retailing
the sale of goods directly to consumers
Stock
the shares of ownership if a corporation
ethics
the study of right and wrong and the morality of the choices individuals make An ethical decision or action is one that is "right" according to some standard of behaviors
Board of Directors
the top governing body of a corporation, the members of which are elected by the stockholders Hierarchy of Corporate Structure
Economic model of social responsibility
the view that society will benefit most when business is left alone to produce and market profitable products that society needs
Conflict of interest
when businesspeople take advantage of a situation for their own personal interest rather than for the employee's interest you knowingly do something
Situational ethics
when moral standards change based on conditions
Right the service
which entitles consumers to convenience, courtesy, and responsiveness from manufacturers and sellers of consumer products
Right to consumer education
which entitles people to be fully informed about their rights as consumers
The Score Association
(Servive Corps of Retired Executives) a group of businesspeople who volunteer their services to small businesses through the SBA matches you with a mentor who helps guide you through the process basesedon issues and challenges
Guidelines for making ethical decisions
1.) listen & learn 2.) Identify the ethical issues 3.) Create and analyze options 4.) Identify the best option from your point of view 5.) Explain your decision and resolve any difference that arises
Caveat Emptor
A Latin phrase meaning "let the buyer beware" aka "what you see is what you get" and if it is not expected too bad
Corporation S Corp
A corporation meeting certain requirements removes the Double Taxation, as they are taxed as a partnership Additional requirements to be an S corp No more than 100 stockholders Stockholders must be individuals, estates, or certain trusts No nonresident/alien shareholders Only one class of outstanding stock Must be a domestic corporation All stockholders agree to become an S Corp
Dividend
A distribution of earnings to the stockholders of a corporation
Franchise
A license to operate an individually owned business as though it were part of a chain of outlets or stores
Types of ranching
A manufacturing authorizes a number of retails stores to sell a certain brand-name item Oldest type Prevalent in in sales of passenger cars and trucks, farm equipment, shoes, paint, earth-moving equipment, and petroleum A producers licenses distributors to sell a given product to retailers Common in soft drink industry Coke and pepsi franchise independent bottlers who then serve retailers Franchisor supplies brand names, techniques, or other services rather than a compete product Primary role is the careful development and control of marketing strategies Dual-branded Franchises: 2 franchisors offer their products together, are a new small-buinses trend
Conglomerate merger
A merger takes place between firms in completely different industries
Executive summary
A one- to two-page overview of the entire business plan, including a justification why the business will succeed.
General Partnership
A person who assumes full or shared responsibility for operating a business Owned by 2 or more individuals Expect in certain cases, not recommended
Limited Partners (LPs) (Silent Partners)
A person who invests money in a business but who has no management responsibility or liability for losses beyond their investments in the partnership Owned by 2 or more individuals Can address some of the issues with partnerships, but also loses advantages
Partnership
A voluntary association of 2 or more persons to act as co-owners of a business for profit
Sole Proprietoship disadvantage
All responsibility/Many roles *** Difficult to Finance Lack of continuity No one can take over or step in if something happens to the owner Can be difficult to hire employees Unlimited Liability
Franchisor
An individual or organization granting a franchise Supplies a known/ advertised business name, management skills, the required training/ materials, and a method of doing business obligations: To carry on the business franchised and no other business upon the approved and nominated premises; To observe certain minimum operating hours; To pay a franchise fee; To follow the accounting system laid down by the franchisor; Not to advertise without prior approval of the advertisements by the franchisor; To use and display such point-of-sale advertising materials as the franchisor stipulates; To maintain the premises in good, clean, and sanitary condition and to redecorate when required to do so by the franchisor; To maintain the widest possible insurance coverage; To permit the franchisor's staff to enter the premises to inspect and see if the franchisor's standards are being maintained; To purchase goods or products from the franchisor or its designated suppliers; To train the staff in the franchisor's methods to ensure that they are neatly and appropriately clothed; Not to assign the franchise contract without the franchisor's consent.
Consumer Bill of Rights
Asserted that consumers have the right to safety, to be informed, to choose, to be heard, to consumer education, courteous service
LLC Advatnages
Avoids double taxation Limited Liability Management and Reporting Flexibility No restrictions on owners/stockholders Fewer IRS regulations
Introduction
Basic information such as the name, address, and phone number of the business; the date the plan was issued; and a statement of confidentiality to keep important information away from potential competitors.
Social Resposnibilty Pros
Because business is a part of our society, it cannot ignore social issues. The business has the technical, financial, and managerial resources needed to tackle today's complex social issues. By helping resolve social issues, businesses can create a more stable environment for long-term profitability. Socially responsible decision-making by firms can prevent increased government intervention, which would force businesses to do what they fail to do voluntarily.
Social Responsibilities Cons
Business managers are responsible primarily to stockholders, so management must be concerned with providing a return on owners' investments. Corporate time, money, and talent should be used to maximize profits, not to solve society's problems. Social problems affect society in general, so individual businesses should not be expected to solve these problems. Social issues are the responsibility of government officials who are elected for that purpose and who are accountable to the voters for their decisions.
Limited Liability Company (LLC)
Combines benefits of corporation and partnership while avoiding some of the disadvantages A form of business ownership that combines the benefits of a corporation and a partnership while avoiding some restrictions and disadvantages of those forms
business plan basic purposes
Communication: a business plan serves as a concise document that potential investors can examine to see if they would like to investor assist in financing a new venture, show if the business has the potential to make a profit Management: the business plan helps track, monitor, and evaluate the progress Planning/ due diligence: the business plan guides a businessperson through various phases of business, helps identify obstacles to avoid, and establishes alternatives answers 4 questions What is the nature & mission of the new venture? Why is this new enterprise a good idea? What are the businesspersn;'s goal How much will the new venture cost?
Small business institutes (SBIs)/ Incubators
Created in 1972, a group of seniors and graduate students in business adminssation who provide management counseling to small business walks through and helps think through the concepts of business
Social factors
Culture, internet interaction, attitudes towards significant others
Not-for-Profit Corporations
Designed to provide a social, educational, religious, or other service rather than to earn a profit Tax-exempt Need solid business principles to be successful The high degree of visibility and accountability expected
C Corp disadvantages
Difficult to create/form Government regulation and Increased Paperwork/Reporting Requirements Conflicts within corporations Lack of Secrecy Have to report detailed report that competition can view Double Taxation
LLC Disadvantages
Difficulty attracting investors Higher starting and maintenance costs than partnership or SP Tax rate as "owner" higher than being an employee
Existing strategy
Discussion of a succession plan or going public. Who will take over the business?
Manufacturing & operations plan
Discussion of facilities needed, space requirements, capital equipment, labor force, inventory control, and purchasing requirement.
Marketing plan
Discussion of markets, market trends, competition, market share, pricing, promotion, distribution, and service policy.
Management team
Discussion of skills, talents, and job descriptions of management team, managerial compensation, management training needs, and professional assistance requirements.
Labor force
Discussion of the quality of skilled workers available and the training, compensation, and motivation of workers.
General Partnership Advantages
Easy to create Help with tasks/Pooled strengths Help with funding Easy tax filing Partners keep all profits
Why be an entrepreneur
Entrepreneurial Spirit, Independence A desire to determine one's own destiny A willingness to find and accept a challenge Family background Age Motivation
Crowdfunding
Entreprenuesr post descriptions of their project or business and then invite people to contribute Sometimes contributors get a reward ex.) fundraising campaigns gofundme
Critical risk & assumption
Evaluation of the weaknesses of the business and how the company plans to deal with these and other business problems.
Franchisor Disadvantages
Failure of the franchisee to operate the franchise properly Disputes with and lawsuits by franchises over the terms of franchise contract
Ethical issues
Fairness & honesty , Organizational relationships, conflict of interest, ethical communication, plagiarism
Sole Proprietoship Advantages
Freedom and Autonomy Easy to form, easy to dissolve without the service of an attorney Only need to register a business name and obtain the necessary license/permits Easy tax filing Taxed as personal income Keep all profits Reinvest into frim Pay it out as dividends (basically paying it to yourself) Title/Prestige/Pride of ownership
Franchisee Advanatges
Gets the opportunity to start a business with limited capital and to make use of the business experience of others Receives advice from the franchisor, often free of charge Receive materials to use in local advertising and can take part in national promotional campaigns sponsored by the franchisor May be able to minimize the cost of advertising, supplies, and various business necessities by purchasing them in cooperation with other franchisees
Types of mergers
Horizontal, vertical, conglomerate
Production Industry
Includes construction, mining, manufacturing industries
Benefits to community
Information on how the business will have an impact on economic development, community development, and human development.
Why businesses fail
Lack of capital and cash-flow problems (the number one reason for business failure) Lack of management skills Overexpansion
Service Industry
Nonfinal services: medical/ dental services, object repairs, haier cutters/styles, restaurants, dry cleaning Financial services: accounting, insurance, real estate, investment counseling
Sole Proprietorship
Owned (and usually operated) by 1 person 80% of US business, making up 20% of revenue most common in retailing, service, and agriculture ex.) Walmart
Limited Partners Disadvnatges
Partner Disagreements Frozen Investments Lack of continuity
General Partnership disadvantage
Partner Disagreements Responsible for partner actions Frozen Investments Lack of continuity Unlimited Liability
Individuals factors
Personal knowledge, values, goals
Small business advantages
Personal relationships with customers and employees Ability to adapt to change Simplified record keeping Independence Have advantages of sole proprietorships Keep all profits, ease/ low cost of going in or out of business, able to keep proprietary information private
