Exam 2

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Small business administration (SBA)

Privately owned firms that provide venture capital to small enterprises that meet their investment standards; helps provide grants for you to help start a business

Trade association role in ethics

Provide ethical guidelines for their members Ensure codes do not contain provisions that may run afoul of antitrust levels

importance of small business

Providing technical Innovation ex.) air conditions, insulin, instant cameras, airplanes Providing employment Providing competition Filling the needs of society and other business

Debt Financing

Requires the entrepreneur to repay the invested amount at a later date

Small business Disadvanatge

Risk of failure Limited potential Limited ability to raise capital 3 sources of funding Angle investors Venture capitalists Crowdfunding

Financial plan

Summary of the investment needed, sales and cash flow forecasts, breakeven analysis, and sources of funding.

Appendix

Supplementary information crucial to the plan, such as résumés of owners and principal managers, advertising samples, organization chart, and any related information.

Corporation C Corp

Technically a separate entity under the lawn artificial person Can be public (open) or private (closed) An artificial person, created by law with most of the legal rights of a real pension such as: The right ro state & operate a business, to buy or sell property, borrow money, to sue or be sued, ro enter into binding contacts Only exists on paper

Limited Partners (LPs) Advantage

Technically, limited involvement with other partners Help with funding Easy tax filing Partners keep all profits Limited Liability, if formed properly

Franchisee Disadvantages

The amount of control retained by the franchisor The franchisor contract can dictate all aspects of the business Ex.) All Burger King fries taste the same because the franchisees have to make them the same way Franchisors opening competing franchises within the franchisee's market

Company & industry

The background of the company, choice of the legal business form, information on the products or services to be offered, and examination of the potential customers, current competitors, and the business's future.

Deciding factors on where to incorporate

The cost of incorporating in one state compared with the cost in another state The advantages and disadvantages of each state's corporate laws and tax structure

Small-Business development Center (SBCCs)

University-based groups that provide individual counseling qand practical training to owners of small businesses Draws resources from local, state, and federal governments, private businesses, and universities Provide managerial and technical help, data from research studies, and other types of specialized assistance of value

Hard-Core Unemployed

Workers with little education or vocational training and a long history of unemployment

Limited Partnership vs LLP

_______must have at least one general partner that has unlimited liability ______ may have limited liability for the malpractice & negligence of the other partners

Business plan

a carefully constructed guide for starting a business

Alien Corporation

a corporation charted by a foreign government and conducting business in the US ex.) toyota, royal dutch shell

Foreign Corportation

a corporation in any state in which it does business except the one in which is incorporated ex.) home depot is domestic to delaware in other states it foreign

Domestic Corporation

a corporation in the state on which it is incorporated

Closed corporation

a corporation whose stock is owned by relatively few people ans is not sold to the general public ex.) mars

Small Business Administration (SBA)

a government agency that assists, counsels, and protects the interest of small businesses in the United States

Equal Employment Opportunity Commission (EEOC)

a government agency with the power to investigate complaints of employment discrimination and the power to sue firms that practice it

Code of ethics

a guide to acceptable and ethical behavior as defined by the organization Outlines uniform policies, standards, and punishment for violations (companies roles in ethics)

Unlimited Liability

a legal concept that holds a business owner personally responsible for all the debts of the business (biggest single disadvantage) if the business has debts to pay the court system can go past the business assets into personal assets to pay back debts

Proxy

a legal form listing issues to be decided at a stockholders' meeting and enabling stockholders to transfer their voting rights to some other individual or individuals

Horizontal Merger

a merger between firms that make and sell similar products or services in similar markets

Vertical mergers

a merger between firms that operate at different but related levels in the production and marketing of a product

Stock Holders

a person who owns a corporation's stock

Affirmative Action Program

a plan designed to increase the number of employees from underrepresented groups at all levels within an organization

Hostile Takeover

a situation in which the management and board of directors of a firm targeted for acquisition disapprove of the merger

Syndicate

a temporary association of individuals or firms organized to perform a specific task that requires a large amount of money

Corporate citizenship

adopting a strategic approach to fulfilling economic, ethical, environmental, and social responsibilities Requires balancing the needs, desires, and demands of a diverse group of stakeholders including investors, employees, customers, regulators, competitors, neighborhoods and communities, and social activist

Consumerism

all activities are undertaken to protect the rights of consumers

Joint Venture

an agreement between two or more groups to form a business entity in order to achieve a specific goal or to operate for a specific period of time

Small Business

an independent business with fewer than 500 employees, depending on its industry

The right to be chosen

consumers must be given a choice of products, offered by different manufacturers and sellers, to satisfy a particular need

Types of industries

distribution, service, production

SBA Management Assistance

emphasizes on improving the management ability of the owners and managers of small business Includes free individual consueling, courses, conferences, workshops, and wide range of publications Provides management and technical assistance Managemnet Coruces and Workshops: covers all functions, duies, and roles of mangers Courses incldue Entrepreneurship, Starting and Managing Your Own Business, Developing a Business Plan, Managing the Digital Enterprise, Identify Your Target Market, and Analyze Profitability.

Franchisor Advantages

gains fast and well-controlled distribution of its products without incurring the high cost of constructing and operating its own outlet Has more capital available to expand production and use advertising Can ensure through the franchise agreement that outlets are maintained and operated according to its own standards Benefits from the fact that franchisee is likely to be very highly motivated to succeed, which translates into more sales and thus higher royalties for the franchisor

Ethical Communication

how do I positions thing in an ethical way so I am not misleading people

Limited Liability

if the business owes debts can only go to the thing in the business assets and not get your personal assets

Articles of incorporation

includes he firm name/ address The incorporator's name/ address The purpose of the corporation The max. Amount of stock and types of stock to be issued The length of time the corporation is to exist The name/ address of the corporation's registered agent

Major Forces in Consumerism

individual consumer advocates and organizations, consumer education programs, and consumer

level of ethical behavior

individual factors, social factors, opportunity

Distribution Industries

industries concerned with the movement of goods from producers to consumers includes retailing, wholesaling, transportation, and communication

Whistle-blowing

informing the press or government officials about unethical practices within one's organization The sarbanes-oxley Act of 2002 protects whistle-blowers who report corporate misconduct Federal employees who report wrongdoing are protected by the Whistleblower Protection Act of 1989

Busness plan comments

introduction, executive summary, benefits to community, company & industry, management team, manufacturing & operation plan, labor force, marketing plan, financial plan, existing strategy, critical risk & assumption, appedeix

Equity Financing

involves raising funds by promising inversors a share of future profits and an ownership stake in the business

SBA Publication

issues management, marketing, and technical publications dealing with hundreds of topics of interest to current and prospective managers of small firms that are free of charge

Plagiarism

knowingly taking someone else's words, ideas, or other original material without acknowledging the source

C Corp Advantages

limited liability, Easy to raise money/ capital Easy to transfer ownership Perpetual Life Withdrawal, death, or incompetence does not terminate corporation Specialized Management

The right to be informed

means that consumers must have access to complete information about a product before they buy it

The right to be heard

means that someone will listen and take appropriate action when customers complain

Venture capital

money that is incestedin small (and sometimes struggling) firms that have the potential to become successful

Open Corporations

one whose stock can be brought and sold by any individual ex.) General Electric, Microsoft, apple, Nike

Angle investors

people who donate to you by you back them back' private individuals who invest money in exchange for ownership in the company

SBA Financial Assistance

primary function to guarantee loans to eligible business Offer help to cover after natural distaners and economic crisis Microloan program: provides loans to help small business start and expand

Sarbanes-Oxley Act of 2002

provides sweeping legal protection for employees who report corporate misconduct (Government Role in Encouraging Ethics)

Wholealster

purchase products in quantity from manufacturers and then resell them to retailers

Articles of partnership

refers to an agreement listing and explaining the of the partnership Should include: Name of people/ business address Nature of business Duties of each partner Investments each partner invests Salary of each partner/ how profits & losses will be divided What will happen if a partner dies or wants to end the partnership Articles of partnership: refers to an agreement listing and explaining the of the partnership Should include: Name of people/ business address Nature of business Duties of each partner Investments each partner invests Salary of each partner/ how profits & losses will be divided What will happen if a partner dies or wants to end the partnership

Opportunity

refers to the amount of freedom an organization affords an employee to behave unethically if he or she makes that choice Eliminate opportunity for people to make good or bad decisions

Acquisition

same as a merger but used to reference to a large corporation's purchase of another corporation

Preferred Stock

stock owned by individuals or firms who usually do not have voting rights but whose claims on dividends are paid before those of common stock owners

Franchising

the actual granting the license

Business ethics

the application of moral standards to business situations

Corporate Officers

the chairperson of the board, president, executive vice presidents, corporate secretary, treasurer, and any other top executive appointed by the board of directors Help board make plans, carry out strategies, hire employees, and manage day-to-day business operations monthly report to board of directors

Merger

the combining of 2 corporations or other business entities to form one business

Socioeconomic model of social responsibility

the concept that business should emphasize not only profit but also the impact of its decisions on society

Double Taxation

the corporation has the pay taxes on profits made and the shareholder has to pay taxes on the buildings

Entrepreneurial Spirit

the desire to create a new business

Common Stock

the most basic form of corporate ownership and whose owners may vote on corporate policies Generally has one vote per share owned

Limited liability partnership (LLP)

the partner may have limited liability protection from legal action resulting from the malpractice or negligence of the other partner Some states restrict this type to accountants, architects, attorneys, etc.

Franchisee

the person or organization purchasing the franchise Supplies labor, capital, operayes the franchised business, and agrees to abide by the provisions of the franchise agreement Franchisee Rights Use of trademarks, trade names, and patents of the franchisor; Use of the brand image and the design and decor of the premises developed by the franchisor; Use of the franchisor's secret methods; Use of the franchisor's copyrighted materials; Use of recipes, formulae, specifications, processes, and methods of manufacture developed by the franchisor; Conducting the franchised business upon or from the agreed premises strictly in accordance with the franchisor's methods and subject to the franchisor's directions Guidelines established by the franchisor regarding exclusive territorial rights; and Rights to obtain supplies from nominated suppliers at special prices

Consumers' right to safety

the product they purchase must be safe for their intended use, must include thorough and explicit directions for proper use, and must be tested by manufacturers to ensure product quality and reliability

Social responsibility

the recognition that business activities have an impact on society and the consideration of that impact in business decision-making

Retailing

the sale of goods directly to consumers

Stock

the shares of ownership if a corporation

ethics

the study of right and wrong and the morality of the choices individuals make An ethical decision or action is one that is "right" according to some standard of behaviors

Board of Directors

the top governing body of a corporation, the members of which are elected by the stockholders Hierarchy of Corporate Structure

Economic model of social responsibility

the view that society will benefit most when business is left alone to produce and market profitable products that society needs

Conflict of interest

when businesspeople take advantage of a situation for their own personal interest rather than for the employee's interest you knowingly do something

Situational ethics

when moral standards change based on conditions

Right the service

which entitles consumers to convenience, courtesy, and responsiveness from manufacturers and sellers of consumer products

Right to consumer education

which entitles people to be fully informed about their rights as consumers

The Score Association

(Servive Corps of Retired Executives) a group of businesspeople who volunteer their services to small businesses through the SBA matches you with a mentor who helps guide you through the process basesedon issues and challenges

Guidelines for making ethical decisions

1.) listen & learn 2.) Identify the ethical issues 3.) Create and analyze options 4.) Identify the best option from your point of view 5.) Explain your decision and resolve any difference that arises

Caveat Emptor

A Latin phrase meaning "let the buyer beware" aka "what you see is what you get" and if it is not expected too bad

Corporation S Corp

A corporation meeting certain requirements removes the Double Taxation, as they are taxed as a partnership Additional requirements to be an S corp No more than 100 stockholders Stockholders must be individuals, estates, or certain trusts No nonresident/alien shareholders Only one class of outstanding stock Must be a domestic corporation All stockholders agree to become an S Corp

Dividend

A distribution of earnings to the stockholders of a corporation

Franchise

A license to operate an individually owned business as though it were part of a chain of outlets or stores

Types of ranching

A manufacturing authorizes a number of retails stores to sell a certain brand-name item Oldest type Prevalent in in sales of passenger cars and trucks, farm equipment, shoes, paint, earth-moving equipment, and petroleum A producers licenses distributors to sell a given product to retailers Common in soft drink industry Coke and pepsi franchise independent bottlers who then serve retailers Franchisor supplies brand names, techniques, or other services rather than a compete product Primary role is the careful development and control of marketing strategies Dual-branded Franchises: 2 franchisors offer their products together, are a new small-buinses trend

Conglomerate merger

A merger takes place between firms in completely different industries

Executive summary

A one- to two-page overview of the entire business plan, including a justification why the business will succeed.

General Partnership

A person who assumes full or shared responsibility for operating a business Owned by 2 or more individuals Expect in certain cases, not recommended

Limited Partners (LPs) (Silent Partners)

A person who invests money in a business but who has no management responsibility or liability for losses beyond their investments in the partnership Owned by 2 or more individuals Can address some of the issues with partnerships, but also loses advantages

Partnership

A voluntary association of 2 or more persons to act as co-owners of a business for profit

Sole Proprietoship disadvantage

All responsibility/Many roles *** Difficult to Finance Lack of continuity No one can take over or step in if something happens to the owner Can be difficult to hire employees Unlimited Liability

Franchisor

An individual or organization granting a franchise Supplies a known/ advertised business name, management skills, the required training/ materials, and a method of doing business obligations: To carry on the business franchised and no other business upon the approved and nominated premises; To observe certain minimum operating hours; To pay a franchise fee; To follow the accounting system laid down by the franchisor; Not to advertise without prior approval of the advertisements by the franchisor; To use and display such point-of-sale advertising materials as the franchisor stipulates; To maintain the premises in good, clean, and sanitary condition and to redecorate when required to do so by the franchisor; To maintain the widest possible insurance coverage; To permit the franchisor's staff to enter the premises to inspect and see if the franchisor's standards are being maintained; To purchase goods or products from the franchisor or its designated suppliers; To train the staff in the franchisor's methods to ensure that they are neatly and appropriately clothed; Not to assign the franchise contract without the franchisor's consent.

Consumer Bill of Rights

Asserted that consumers have the right to safety, to be informed, to choose, to be heard, to consumer education, courteous service

LLC Advatnages

Avoids double taxation Limited Liability Management and Reporting Flexibility No restrictions on owners/stockholders Fewer IRS regulations

Introduction

Basic information such as the name, address, and phone number of the business; the date the plan was issued; and a statement of confidentiality to keep important information away from potential competitors.

Social Resposnibilty Pros

Because business is a part of our society, it cannot ignore social issues. The business has the technical, financial, and managerial resources needed to tackle today's complex social issues. By helping resolve social issues, businesses can create a more stable environment for long-term profitability. Socially responsible decision-making by firms can prevent increased government intervention, which would force businesses to do what they fail to do voluntarily.

Social Responsibilities Cons

Business managers are responsible primarily to stockholders, so management must be concerned with providing a return on owners' investments. Corporate time, money, and talent should be used to maximize profits, not to solve society's problems. Social problems affect society in general, so individual businesses should not be expected to solve these problems. Social issues are the responsibility of government officials who are elected for that purpose and who are accountable to the voters for their decisions.

Limited Liability Company (LLC)

Combines benefits of corporation and partnership while avoiding some of the disadvantages A form of business ownership that combines the benefits of a corporation and a partnership while avoiding some restrictions and disadvantages of those forms

business plan basic purposes

Communication: a business plan serves as a concise document that potential investors can examine to see if they would like to investor assist in financing a new venture, show if the business has the potential to make a profit Management: the business plan helps track, monitor, and evaluate the progress Planning/ due diligence: the business plan guides a businessperson through various phases of business, helps identify obstacles to avoid, and establishes alternatives answers 4 questions What is the nature & mission of the new venture? Why is this new enterprise a good idea? What are the businesspersn;'s goal How much will the new venture cost?

Small business institutes (SBIs)/ Incubators

Created in 1972, a group of seniors and graduate students in business adminssation who provide management counseling to small business walks through and helps think through the concepts of business

Social factors

Culture, internet interaction, attitudes towards significant others

Not-for-Profit Corporations

Designed to provide a social, educational, religious, or other service rather than to earn a profit Tax-exempt Need solid business principles to be successful The high degree of visibility and accountability expected

C Corp disadvantages

Difficult to create/form Government regulation and Increased Paperwork/Reporting Requirements Conflicts within corporations Lack of Secrecy Have to report detailed report that competition can view Double Taxation

LLC Disadvantages

Difficulty attracting investors Higher starting and maintenance costs than partnership or SP Tax rate as "owner" higher than being an employee

Existing strategy

Discussion of a succession plan or going public. Who will take over the business?

Manufacturing & operations plan

Discussion of facilities needed, space requirements, capital equipment, labor force, inventory control, and purchasing requirement.

Marketing plan

Discussion of markets, market trends, competition, market share, pricing, promotion, distribution, and service policy.

Management team

Discussion of skills, talents, and job descriptions of management team, managerial compensation, management training needs, and professional assistance requirements.

Labor force

Discussion of the quality of skilled workers available and the training, compensation, and motivation of workers.

General Partnership Advantages

Easy to create Help with tasks/Pooled strengths Help with funding Easy tax filing Partners keep all profits

Why be an entrepreneur

Entrepreneurial Spirit, Independence A desire to determine one's own destiny A willingness to find and accept a challenge Family background Age Motivation

Crowdfunding

Entreprenuesr post descriptions of their project or business and then invite people to contribute Sometimes contributors get a reward ex.) fundraising campaigns gofundme

Critical risk & assumption

Evaluation of the weaknesses of the business and how the company plans to deal with these and other business problems.

Franchisor Disadvantages

Failure of the franchisee to operate the franchise properly Disputes with and lawsuits by franchises over the terms of franchise contract

Ethical issues

Fairness & honesty , Organizational relationships, conflict of interest, ethical communication, plagiarism

Sole Proprietoship Advantages

Freedom and Autonomy Easy to form, easy to dissolve without the service of an attorney Only need to register a business name and obtain the necessary license/permits Easy tax filing Taxed as personal income Keep all profits Reinvest into frim Pay it out as dividends (basically paying it to yourself) Title/Prestige/Pride of ownership

Franchisee Advanatges

Gets the opportunity to start a business with limited capital and to make use of the business experience of others Receives advice from the franchisor, often free of charge Receive materials to use in local advertising and can take part in national promotional campaigns sponsored by the franchisor May be able to minimize the cost of advertising, supplies, and various business necessities by purchasing them in cooperation with other franchisees

Types of mergers

Horizontal, vertical, conglomerate

Production Industry

Includes construction, mining, manufacturing industries

Benefits to community

Information on how the business will have an impact on economic development, community development, and human development.

Why businesses fail

Lack of capital and cash-flow problems (the number one reason for business failure) Lack of management skills Overexpansion

Service Industry

Nonfinal services: medical/ dental services, object repairs, haier cutters/styles, restaurants, dry cleaning Financial services: accounting, insurance, real estate, investment counseling

Sole Proprietorship

Owned (and usually operated) by 1 person 80% of US business, making up 20% of revenue most common in retailing, service, and agriculture ex.) Walmart

Limited Partners Disadvnatges

Partner Disagreements Frozen Investments Lack of continuity

General Partnership disadvantage

Partner Disagreements Responsible for partner actions Frozen Investments Lack of continuity Unlimited Liability

Individuals factors

Personal knowledge, values, goals

Small business advantages

Personal relationships with customers and employees Ability to adapt to change Simplified record keeping Independence Have advantages of sole proprietorships Keep all profits, ease/ low cost of going in or out of business, able to keep proprietary information private


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