Intro to Business - Chapter 4 - small business and entrepreneurship

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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


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