Business Structures + Mastery Test

Part E Some states charge a recycling or disposal fee on certain electronic items, including computers. Assume you live in one of these states. This fee, which is generally charged at the time of purchase, increases your cost by approximately $5. What is your financial cost now to purchase the computer?

The disposal fee increases the cost to $1,105

Part B If you have the money in cash or in your checking account to pay for your new computer in full at the time of purchase, what will your financial cost be to purchase the computer?

The financial cost will be $1,100

What do individual shareholders gain when they buy shares of a company's stock?

a. they gain partial ownership in the corporation

Part B How many stores does Tran own?

He owns three stores

Match each business structure with the scenario that illustrates it.

Bob just finished school - partnership Sandra worked as a nurse - sole proprietorship Anita and Marco - limited liability corporation The Anderson sisters - corporation

Part C If you brought on a business partner, how could it help your business?

Having a partner would allow me to focus on designing and recruitment while my partner focuses on client service and account management. If both of us focus on what we're good at, it will benefit the business.

Imagine that you've just obtained a master's degree. You want to use your knowledge in the subject you studied to run a successful business. Answer the following questions about your future business. Part A If you could start your own business, what would it be?

I would like to start an architectural firm

Part C Tran owns another business in addition to his stores. What does that business do?

It is an import-export wholesale distribution business.

Part D What does Leeching plan to do with her future?

Leeching plans to take over the family company.

Part D If you brought on a business partner, what challenges would you to face?

Partnership could be a terrible idea if the partner was lazy, unreliable, or deceitful. Plus, I would not have complete control of the business in a partnership. I might have to compromise on matters that are important to me. Also, I would have to share the profits.

Question 1 You think you've found the computer that you would like to buy. You've done your research, and the cheapest computer you have found that meets your needs costs $1,100. The price includes the computer, printer, software, and sales tax. Use this information to answer the following questions about the costs and benefits of your purchase. Part A What is the benefit to you of buying a computer? List all the ways you will benefit from buying this item. Think about how you might use it for school, work, entertainment, communication, and so on.

The computer will be extremely useful for these activities: -studying -watching movies -playing games -keeping in touch with friends and family -using social media -reading news and other articles -managing a bank account -shopping -searching for a job

Part D What additional costs would you pay after purchasing your computer?

These additional costs could increase the total cost of ownership: -interest (if purchased with a loan) -paper and ink cartridges for the printer -Internet charges -increased electricity charges -annual renewal of antivirus software -maintenance and repair

Part E What was the purpose of the loan that Tran took out from the SBA?

Tran got the loan to expand his export business

Part C How might you financially benefit in the future from this purchase?

By helping me study, my computer will help me prepare for a career. In the future, I could use it for work.

Select the correct answer from each drop-down menu. In a market economy, _______ brings more, higher-quality products and lower _______ for consumers. In a market economy, the incentive of the producer is to make a _______. The potential for profit and limited government intervention are what make _______ thrive in a market-based economy. Legally protected _______ ensure that people have collateral, enabling them to take out loans.

-competition -prices -profit -entrepreneurs -property rights

Which statements indicate that Rick's company is a limited liability company?

1. Because Dazzle is not a separate tax entity, all the owners declare revenue earned through the company on their personal federal tax returns. 2. The $5 million dollar villa is protected from business liabilities unless the liability is incurred through wrongful acts.

Read this scenario, and then answer the question that follows. Richard is excited to start his trucking business. After taking out a loan, he decides to buy 10 used trucks and to hire drivers who live in his small town, which is 100 miles from the nearest big city. What potential economic consequences has Richard not taken into consideration while making his decision?

Richard needs to consider these points: -If the town is 100 miles from the nearest big city, are enough goods that need to be trucked being produced in the area? -Used trucks may incur expenses in the form of maintenance and repairs. Will the business have enough revenue to support these costs? -How much money will need to be invested in fuel for the trucks? -Will he find enough drivers with sufficient skills to drive trucks in his small town?

Question 2 Using your answers to the previous questions, compose one to three well-written paragraphs analyzing the costs and benefits of your potential purchase. Draw a conclusion about whether your purchase is justified.

The purchase of a computer comes with several additional monthly and annual costs. Bills for broadband Internet service (approximately $90) and additional electricity usage (approximately $10) would add a monthly cost of $100. Annually, the cost for Internet and electricity would be $1,200. The antivirus software must be renewed every year (approximately $20). So, the approximate annual cost rises to $1,220. Plus, I will have to buy paper and cartridges for the printer from time to time. I could reduce the cost of Internet access by opting for a low-speed connection, but that would prevent me from making the most of my computer. Even though the cost of broadband is quite high, the computer is worth it. I can think of many ways that the computer can benefit me over time. I can use it to earn some money by doing part-time work, writing a blog, or contributing to a video channel. The computer will meet my business, academic, social, and entertainment needs. So I believe my purchase is justified.

Which two sentences describe characteristics of a partnership?

b. the owners pool their resources to raise capital d. The business benefits because owner can share responsibilities

Part B Would you start it yourself or with someone else? Why?

Starting a business is a lot of work and requires a variety of skills, so it would be nice to have a partner.

Drag the tiles to the correct boxes to complete the pairs Match each phrase with the scenario that illustrates it.

The computer accessories that Javier is making: profit motive Susan uses her office building: property rights While nervous that foreign companies: international competition Because people bought the new food item: consumer sovereignty Sam realized that his business: wealth creation

Read about the success story of grocery store owner Duc Tran. As you read, think about the advantages and disadvantages of the various types of business structures and then answer the questions that follow. Part A What type of business does Tran own?

Tran owns a grocery store chain specializing in Vietnamese, Thai, and Chinese foods.

Question 2 Part A Compose a memo of at least two paragraphs advising Tran which business structure he should choose for his growing business. In your analysis, be sure to include the following information: his greatest strengths as an entrepreneur some probable challenges he might have faced or will face in the future the type of business structure you would recommend benefits of the structure you would recommend as applied to his particular situation Be sure to use proper grammar, an introduction and a conclusion, transitions, and information from the article.

Tran, It was wise of you to capitalize your knowledge of Asian food and specialize in familiar dishes. Viet-Wah is indeed unique because it specializes in Vietnamese, Thai, and Chinese food. It helps that these cuisines enjoy widespread popularity. Being an established and popular store, Viet-Wah surely has plenty of loyal customers. However, the new generation of customers is quite different from the older generation. Catering to this generation of customers could pose challenges. First, customers today expect businesses to have an online presence and to provide amenities such as free delivery, online delivery, online discounts, and so on. You could face competition from businesses with smarter online strategies. However, your daughter Leeching is more in tune with the younger generation. She knows the importance of social media and is therefore a big asset for Viet-Wah. Second, the new generation of customers wants food that is healthy, delicious, and easy to cook. It may be challenging to find products that can fulfill all three criteria. To prepare for the future, I think you would benefit by turning Viet-Wah into an LLC and adding Leeching as a partner. Viet-Wah will not be a separate tax entity, so paying taxes won't be complicated. More important, your personal assets would be protected from liabilities. You could incorporate the business instead, but incorporating would entail high costs and a lot of recordkeeping and paperwork. Therefore, incorporating would make sense only if you intend to expand the business on a very large scale.

As you read these two scenarios, think about the possibilities that exist when starting a business and the choices that must be made. Then answer the question that follows. Scenario 1 Kristina wants to expand her custom furniture business. She's been building furniture in her basement for a few years now. She started out selling only to friends and family and then began to sell online. Now she's getting so many orders that she can barely keep up with them all. She knows that to expand, she needs to start a factory and hire workers. She decides on a location about 10 minutes from her home. Over dinner with a friend, she explains how fortunate she is to live near a major city with a big airport, a good highway system, and an educated workforce and to have a business in a state with minimal regulations and low taxes. Scenario 2 Andrew has been creating custom car accessories in his garage for years. He's been selling so many accessories online that he can barely keep up with his orders. He lives in a small town, so there aren't many people he can employ to work for him. He pays a significant amount of his income in taxes as well. He realizes he might need to move to expand his business. But he's dreading the trip to investigate possible locations because it's a two-hour drive on narrow two-lane roads to reach the nearest major airport. What is driving Andrew's and Kristina's decisions on where to expand their businesses?

Several factors are driving Kristina's and Andrew's business decisions. Here are a few: -tax rates -availability of labor -distance to a major airport -access to highways -transportation infrastructure