Entrepreneurship

S-Corporation

Takes its name from Subchapter S of the Internal Revenue Code. --Is commonly known as a "tax option corporation"—it is taxed similarly to a partnership. --Avoids the imposition of income taxes at the corporate level yet retain the benefits of a corporate form (especially the limited liability).

5-What 3 financial statements are mandatory for the financial segment of the business plan?

balance sheet income statement cash flow

1-Be aware of the five major consumer classifications based on the way they view a venture's product or service.

major consumer classifications: 1- convenience goods 2- shopping goods 3- specialty goods 4- unsought goods 5- new products

Sole proprietorship

-A business that is owned and operated by one person. The enterprise has no existence apart from its owner. -To establish a sole proprietorship, a person merely needs to obtain whatever local and state licenses are necessary to begin operations

disadvantages of a corporation

-Activity restrictions -Lack of representation -Regulation -Organizing expenses -Double taxation

general partnership

-An association of two or more persons acting as co-owners of a business for profit. -The Revised Uniform Partnership Act (RUPA) acts the guide for legal requirements in forming partnerships. Articles of Partnership -Clearly outline the financial and managerial contributions of the partners and carefully delineate the roles in the partnership relationship.

advantages of a partnership

-Ease of formation -Direct rewards -Growth and performance facilitated -Flexibility -Relative freedom from governmental control and regulation -Possible tax advantage

advantages of sole proprietorship

-Ease of formation -Sole ownership of profits -Decision making and control vested in one owner -Flexibility -Relative freedom from governmental control -Freedom from corporate business taxes

Limited Liability Partnership

-Limited Liability Partnership-Allows professionals the tax benefits of a partnership while avoiding personal liability for the malpractice of other partners.

advantages of a corporation

-Limited liability -Transfer of ownership -Unlimited life -Relative ease of securing capital in large amounts -Increased ability and expertise

S Corp Guidelines

-The corporation must be a domestic corporation. -The corporation must not be a member of an affiliated group of corporations. -The shareholders of the corporation must be individuals, estates, or certain trusts. -Corporations, partnerships, and nonqualifying trusts cannot be shareholders. -The corporation must have 100 or fewer shareholders. -Only one class of stock, although not all shareholders may have the same voting rights. -No shareholder may be a nonresident alien.

Disadvantages of Sole proprietorship

-Unlimited liability -Lack of continuity -Less available capital -Relative difficulty obtaining long-term financing -Relatively limited viewpoint and experience

disadvantages of a partnership

-Unlimited liability of at least one partner -Lack of continuity -Relative difficulty obtaining large sums of capital -Bound by the acts of just one partner -Difficulty of disposing of partnership interest

1-Market:

-a group of consumers (potential customers) who have purchasing power and unsatisfied needs -a new venture will survive only if a market exists for tis product or service

1-What is market segmentation?

-the process of identifying a specific set of characteristics that differentiate one group of consumers from the rest -demographic variables --age, marital status, sex, occupation, income, location -benefit variables --convenience, cost, style, trends (depending on the nature of the particular new venture)

1-How can marketing research help an entrepreneur identify a market?

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3.What takes place when you do an Environmental Scan for an environmental assessment of a business venture?

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4-Identify and discuss the questions an entrepreneur should ask when assessing the economic or Macro view environment of a venture as it relates to common industry characteristics. Describe how you would complete a competitive analysis?

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5- What are the benefits of the budgeting process?

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7-Why is the executive summary segment of a business plan written last?

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7.Briefly describe each of the major segments to be covered in a business plan according to Dr. Fortenberry's outline and your class assignment.

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8-What is the nature of the S Corporation? The Limited Liability Partnership? Be able to list the unique qualities of both that make them advantageous for small businesses.

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8. Be able to discuss the advantages and disadvantages of the legal forms of business: sole proprietorship, general partnership and corporation.

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9. What are key questions to be considered by entrepreneurs before structuring their venture?

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advantages for limited liability for small businesses

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advantages of an S-Corp for small businesses

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2-What are the five steps that are particularly helpful when developing a marketing plan? Be able to identify and describe each.

1- appraise marketing strengths and weaknesses, emphasizing "competitive edge" factors 2- develop marketing objectives, along with short-and intermediate-range sales goals 3- develop product/service strategies 4- develop marketing strategies to achieve intermediate- and long-range sales goals and long-term marketing objectives 5- determine a pricing structure

7-Be able discuss the 10 guidelines to be used for preparing a business plan. What are some components to consider in the proper packaging of a plan?

1: Executive Summary 2: Business Description A: General description of business B: Industry background C: Goals and potential of the business and milestones (if any) D: Uniqueness of product or service 3: Marketing A: Research and analysis --Target market (customers) identified --Market size and trends --Competition --Estimated market share B: Marketing plan --Market strategy—sales and distribution --Pricing policy --Advertising and promotions plans 4: Operations A: Identify location ---Advantages ---Zoning ---Taxes B: Proximity to suppliers C: Access to transportation 5: Management A: Management team—key personnel B: Legal structure—stock and employment agreements, and ownership C: Board of directors, advisors, and consultants 6: : Financial A: Financial forecast (pro forma financial statements) ---Profit and loss ---Cash flow ---Break-even analysis ---Cost controls ---Budgeting plans 7: Critical Risks A: Potential problems B: Obstacles and risks C: Alternative courses of action 8: Harvest Strategy A: Transfer of asset B: Continuity of business strategy C: Identity of successor 9: Milestone Schedule A: Timing and objectives B: Deadlines and milestones C: Relationship of events 10: Appendix or Bibliography

Corporations

Corporation --"An artificial being, invisible, intangible, and existing only in contemplation of the law". ~Supreme Court Justice John Marshall --As such, a corporation is a separate legal entity apart from the individuals who own it. Forming a Corporation -Subscriptions for capital stock must be taken and a tentative organization created. -Approval (a charter) must be obtained from the secretary of state in the state in which the corporation is to be formed.

1-What role do demographic and benefit variables play in the segmentation process?

Demographic variables -age, marital status, sex, occupation, income, location benefit variables -convenience, cost, style, trends (depending on the nature of the particular new venture)

6-Identify the benefits of a business plan (a) for an entrepreneur, and (b) for financial sources.

For the Entrepreneur: -The time, effort, research, and discipline required to create a formal business plan forces the entrepreneur to view operating strategies and expected results critically and objectively. For Outside Evaluators: -The business plan provides a tool for use in communications with outside financial sources. Specifically for the Financial Sources: -Details the market potential and plans for securing a share of that market. -Shows how the venture's intends to service debt or provide an adequate return on equity. -Identifies critical risks and crucial events with a discussion of contingency plans. -Contains the necessary information for a thorough business and financial evaluation.

6.What are the critical factors to be considered when preparing a business plan?

Planning is essential to the success of any undertaking. Critical factors that must be addressed when planning are: -Realistic goals. These must be specific, measurable, and set within time parameters. -Commitment. The venture must be supported by all involved—family, partners, employees, team members. -Milestones. Subgoals must be set for continual and timely evaluation of progress. -Flexibility. Obstacles must be anticipated, and alternative strategies must be formulated.

1-Where do you find primary and secondary data?

Secondary Data -information that has already been compiled -advantages: less expensive and available -disadvantages: outdated, lacks specificity, questionable validity -sources: internal and/or external sources -primary data Information that is gathered specifically for the research at hand -surveys -experimentation

5-What is the importance of financial information for entrepreneurs? Briefly describe the key components.

Significant Information for Financial Management -The importance of ratio analysis in planning -Techniques and uses of projected financial statements -Techniques and approaches for designing a cash-flow schedule -Techniques and approaches for evaluating the capital budget