BUS 101 Test 2

General Partner

An owner (partner) who has unlimited liability and is active in managing the firm.

Limited Partner

An owner who invests money in the business, but enjoys limited liability.

• Unlimited Liability

Any debts or damages incurred by the business are your debts, even if it means selling your home, car or anything else.

Merger

The result of two firms joining to form one company.

Small Business Administration (SBA)

A U.S. government agency that advises and assists small businesses by providing management training and financial advice.

Sole Proprietorship

A business owned, and usually managed, by one person.

Intrapreneur

A creative person who works as an entrepreneur within a corporation.

Entrepreneurial team

A group of experienced people from different areas of business who join to form a managerial team with the skills to develop, make and market a new product.

Corporation

A legal entity with authority to act and have liability apart from its owners.

Master Limited Partnership

A partnership that looks much like a corporation, but is taxed like a partnership and thus avoids the corporate income tax.

Limited Partnership

A partnership with one or more general partners and one or more limited partners.

Small Business Investment Company (SBIC)

A program through which private investment companies licensed by the SBA lend money to small businesses.

Conventional (C) Corporation

A state-chartered legal entity with authority to act and have liability separate from its owners (its stockholders).

S Corporation

A unique government creation that looks like a corporation, but is taxed like sole proprietorships and partnerships.

Entrepreneurship

Accepting the risk of starting and running a business.

General Partnership

All owners share in operating the business and in assuming liability for the business's debts

Franchise Agreement

An arrangement whereby someone with a good idea for a business (franchisor) sells the rights to use the business name and sell a product or service (franchise) to others (franchisees) in a given territory.

Leveraged Buyout (LBO)

An attempt by employees, management or a group of investors to buy out the stockholders in a company.

Cooperatives

Businesses owned and controlled by the people who use them- producers, consumers, or workers with similar needs who pool their resources for mutual gain.

Micropreneurs

Entrepreneurs willing to accept the risk of starting and managing a business that remains small, lets them do the work they want to do, and offers a balanced lifestyle.

Venture capitalists

Individuals or companies that invest in new businesses in exchange for partial ownership.

Vertical Merger

Joins two firms in different stages of related businesses.

Horizontal Merger

Joins two firms in the same industry and allows them to diversify or expand their products.

Limited Liability Partnership

Limits partners' risk of losing their personal assets to the outcomes of only their own acts and omissions and those of people under their supervision.

Acquisition

One company's purchase of the property and obligations of another company.

Why do people take the entrepreneur challenge and what does it take to be one?

Opportunity Profit Independent Challenge

What are the four characteristics of useful information?

Quality -information is accurate and reliable Completeness -enough information to allow you to make a decision but not so much to confuse the issue Timeliness - information must reach the manager quick Relevance - different managers have different needs.

• Partnership

Two or more people legally agree to become co-owners of a business.

Conglomerate Merger

Unites firms in completely unrelated industries in order to diversify business operations and investments.

What is the difference between a general partner and a limited partner? Give an example of a situation in which a person would want to be a limited partner.

a) General Partner -- An owner (partner) who has unlimited liability and is active in managing the firm. b) Limited Partner -- An owner who invests money in the business, but enjoys limited liability.

Describe and differentiate between the three types of corporate mergers. Give an example of each type.

a) Vertical Merger -- Joins two firms in different stages of related businesses. b) Horizontal Merger -- Joins two firms in the same industry and allows them to diversify or expand their products. c) Conglomerate Merger -- Unites firms in completely unrelated industries in order to diversify business operations and investments

Not everyone dreams of owning their own business. Identify and describe at least three attributes of successful entrepreneurs.

a. Self-directed: self-disciplined and thoroughly comfortable being your own boss. b. Self-nurturing: must believe in your idea even when no one else does and able to be replenish your own enthusiasm. c. Action-orientated: Burning desire to realize, actualize, and build your dreams into reality. d. Highly energetic: must be emotionally, mentally, and physically able to work long works and hard. e. Tolerant of uncertainty: able to take risk.

Discuss at least three causes of small business failure.

a. Underpricing or overpricing goods or services b. Starting with too little capital c. Buying too much on credit d. Borrowing money without planning just how and when to pay it back e. Forgetting about taxes, insurance, and other costs of doing business.

SBIC

must have a minimum of $5 million in capital and can borrow up to $2 from the SBA for each $1 of capital it has. able to identify a business's trouble spots early, giving entrepreneurs advice, and in some cases rescheduling loan payments

SBA

started a microloan program in 1991 that provides very small loans to small business owners. o Program judges worthiness based on the borrowers' integrity and soundness of their business ideas.

Limited Liability

that liability for the debts of the business is limited to the amount the limited partner puts into the company; personal assets are not at risk.

Advantage of Sole Proprietorship

• Ease of starting and ending the business • Being your own boss • Pride of ownership • Leaving a legacy • Retention of company profit • No special taxes

Disadvantaged of Corporations

• Initial cost • Extensive paperwork • Double taxation • Two tax returns • Size • Difficulty of termination • Possible conflict with stockholders and board of directors

Disadvantages of franchising

• Large start-up costs • Shared profit • Management regulation • Coattail effects • Restrictions on selling • Fraudulent franchisors

Advantages of Corporations

• 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

Advantages of franchising

• Management and marketing assistance • Personal ownership • Nationally recognized name • Financial advice and assistance • Lower failure rate

Advantage of Partnership

• More financial resources • Shared management and pooled/complementary skills and knowledge • Longer survival • No special taxes

Why do people take the entrepreneur challenge and what does it take to be one?

• Small Business -- Independently owned and operated, not dominant in its field of operation and meets certain standards of size. o Businesses are "small" in relation to other businesses in their industries. • Learn from Others - Investigate your local colleges for classes on small business and entrepreneurship; talk to and work for successful local entrepreneurs. • Get Some Experience - Gain three years experience in the field; then start a part-time small business. • Take Over a Successful Firm - Serve as an apprentice and eventually take over once the owner steps down. • Business Plan -- A detailed written statement that describes the nature of the business, the target market, the advantages the business will have over competition, and the resources and owners' qualifications.

Disadvantage of Partnership

• Unlimited liability • Division of profits • Disagreements among partners • Difficult to terminate

Disadvantage of Sole Proprietorship

• financial resources • Management difficulties • Overwhelming time commitment • fringe benefits • Limited growth • life span