MCE Exam 1- 1.3
franchisor
a company that develops a product concepts and sells others the rights to make and sell the products
accounting
keeping records
marketing
knowing your customers
partnership
legal form of business with 2 or more owners
human resources
managing your employees
financing
need money to start a business
franchise
the right to use a specific business's name and sell its products or services in a given territory
conglomerate merger
•: joining of firms in completely unrelated industries
cooperative (co-op)
•A business owned and controlled by the people who use it—producers, consumers, or workers with similar needs who pool their resources for mutual gain •Serve one billion members worldwide •Members democratically control the business by electing a board of directors that hires professional management
keeping records
•Daily sales, expenses, and profits •Inventory control, customer records, and payroll
things included in HR
•Deciding labor needs •Recruiting and selecting the right people •Training and development for growth •Rewards and culture for retention •Motivating for performance
operations
deciding on logistics
how do businesses grow?
corporate expansion
how do owners have an influence on how a business is managed
electing a board of directors
crowdfunding
•donation based or debt-investment (peer-to-peer lending)
double taxation
•must file and pay taxes on corporate level and individual level
consumer market
•people with unsatisfied wants and needs who have both the resources and willingness to buy
vertical merger
•the joining of two companies involved in different stages of related business
limitations of c corp
- Unlimited shareholders - Double taxation:
planning your business involves
- mission, vision, and values - strategic and financial objectives
pros of sole proprietorship
1.Ease of starting and ending the business 2.Being your own boss 3.Pride of ownership 4.Leaving a legacy 5.Retention of company profits 6.No special taxes
basic forms of business ownership
1.Sole proprietorship 2.Partnership 3.Corporation (and LLC) 4.Franchise 5.Cooperative (Co-Op)
cons of sole proprietorship
1.Unlimited liability: responsibility of business owners for all debts of the business 2.Limited financial resources 3.Management difficulties 4.Overwhelming time commitment 5.Few fringe benefits 6.Limited growth 7.Limited life span
C corp
A state-chartered legal entity with authority to act and have liability separate from its owners
s corp
A unique government creation that looks like a corporation but is taxed like sole proprietorships and partnerships
general partnership
All owners share in operating the business and in assuming liability for the business's debts
limited partnership
Includes one or more general partners and one or more limited partners
cons of partnership
Unlimited liability Division of profits Disagreements among partners Difficulty of termination
what does the board of a business do
hires top officers and sets pay for them
flow through entity
income is passed straight to its shareholders or owners
venture capitalists
individuals or companies that invest in new business in exchange for partial ownership of those businesses
general partner
is an owner (partner) who has unlimited liability and is active in managing the firm
limited partner
is an owner who invests money in the business but does not have any management responsibility or liability for losses beyond the investment.
Horizontal merger
joining of 2 firms in the same industry
acquisition
one company's purchase of the property and obligations of another company
franchisee
person who buys a franchise
angels
private individuals who invest their own money in potentially hot new companies before they go public
limited liability
responsibility of a business's owners for losses only up to the amount they invest
unlimited liability
responsibility of business owners for all debts of the business
merger
result of 2 firms forming one company
what do officers do
select managers and employees with the help of the human resource department
most businesses are what?
sole proprietorships
cons of a corporation
•Initial cost •Extensive paperwork. •Double taxation* •Two tax returns* •Size •Difficulty of termination •Possible conflict with stockholders and board of directors
supply chain considerations
•Inventory and inventory control-methods •Location of plants and distributors, etc. •Transportation costs
3 important things in marketing
•Know your customers and adapt quickly to ever-changing demands •Must listen, listen, listen! •It is not enough to get customers, you have to keep them!
cons of franchise
•Large start-up costs •Shared profit •Management regulation •Coattail effects •Restrictions on selling •Fraudulent franchisors
corporation
•Legal entity that is separate and distinct from its owners •"artificial being" - entity that exists only in the eyes of the law •Shareholders have rights to profits (dividends or appreciation of stock) but are not held personally liable for company's debts
Limited Liability Company (LLC)
•Like S Corp, but without the special eligibility requirements •Owner(s) can be a person, partnership, or corporation •Owners are not personally liable •Pay self-employment tax •Pay personal tax or corporate tax •LLC ownership is not transferable (no stock)
pros of corporation
•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
LLC pros
•Limited liability •Choice of taxation •Flexible ownership rules •Flexible distribution of profits and losses •Operating flexibility
pros of franchise
•Management and marketing assistance •Personal ownership •Nationally recognized name •Financial advice and assistance •Lower failure rate
pros of partnerships
•More financial resources •Shared management and pooled/complementary skills and knowledge •Longer survival •No special taxes
limitations of s corp
•No more than 100 shareholders* and must be US citizens or permanent residents •Avoids "double taxation" •Flow-through entity: income is passed straight to its shareholders or owners
cons of an LLC
•No stock; ownership is nontransferable •Fewer incentives •Taxes •Paperwork
sole proprietorship
•Owned, and usually managed, by one person •Owner manages all areas of the business •Usually, fewer benefits and lower wages for employees •Most common form of business
potential sources of capital for a business
•Personal, family, or business associates •Banks and finance institutions (lenders) - SBA - individual investors
manufacturing plan
•Plant size •Machinery required •Production capacity
why small business?
•Starting point to understanding management in general
keeping records helps with
•Tax planning and financial forecasting •Choosing sources of financing and wiring requests for funds
Small Business Administration (SBA)
•US government agency that advises and assists small businesses by providing management, financial advice, and loans
these objectives answer
•What products or services do you provide? •Which population(s) do you serve? •What do you care about? •What makes you unique? •What are your short and long term goals?
franchise agreemenet
•arrangement whereby someone with a good idea for a business sells the rights to use the business name and sell a product or service to others in a given territory