mce business environment part 3 - business types

franchise

The right to use a specific business's name and sell its products or services in a given territory

horizontal merger

joining of two firms in the same industry

Corporate Expansion

mergers and acquisitions

double taxation

must file and pay taxes on corporate level and individual level

vertical merger

the joining of two companies involved in different stages of related business

limited liability

the responsibility of a business's owners for losses only up to the amount they invest; limited partners and shareholders have limited liability

limitations of c corps

unlimited shareholders and double taxation

artificial being

entity that exists only in the eyes of the law

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 Examples: Land O'Lakes, Sunkist Growers, Ocean Spray, Associated Press

Pros of Sole Proprietorship

- Ease of starting and ending the business - Being your own boss - Pride of ownership - Leaving a legacy - Retention of company profits - No special taxes

corporation

- Legal entity that is separate and distinct from its owners - artificial being - shareholders have rights to profits (dividends or appreciation of stock) but are not held personally liable for company's debts -includes c and s corporations

Limited Liability Company (LLC)

- Like S Corp, but without the special eligibility requirements - Owner(s) can be a person, partnership, or corporation and are not personally liable - Pay self-employment tax and (personal tax or corporate tax) - ownership is not transferable (no stock)

pros of partnerships

- More financial resources - Shared management and pooled/complementary skills and knowledge - Longer survival - No special taxes

hierarchy in corporate structure

- Owners have an influence on how a business is managed by electing a board of directors. - The board hires the top officers (and fires them if necessary). It also sets the pay for those officers. - The officers then select managers and employees with the help of the human resource department.

cons of partnerships

- Unlimited liability - Division of profits - Disagreements among partners - Difficulty of termination

limitations of s corps

- no more than 100 shareholders and must be US citizens or permanent residents - avoids double taxation - flow-through entity

Planning your organization

-Mission, Vision, and Values -Strategic and financial objectives Answers: -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?

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

Cons of Sole Proprietorship

-Unlimited liability: responsibility of business owners for all debts of the business -Limited financial resources -Management difficulties -Overwhelming time commitment -Few fringe benefits -Limited growth -Limited life span

Partnership

-legal form of business with two or more owners -includes general and limited partnership

franchisee

A person who buys a franchise

s corporation

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. -includes general partner

what all organizations need

Capital Good ideas Planning Information management Budgets (e.g., financial management) Accounting Marketing Good employee relations Overall managerial know-how

Human Resources: managing your employees

Deciding labor needs Recruiting and selecting the right people Training and development for growth Rewards and culture for retention Motivating for performance

limited partnership

Includes at least one general partner who actively manages the company and accepts unlimited liability -includes limited partner and limited liability

cons of corporation

Initial cost Extensive paperwork. Double taxation* Two tax returns* Size Difficulty of termination Possible conflict with stockholders and board of directors

cons of franchises

Large start-up costs Shared profit Management regulation Coattail effects Restrictions on selling Fraudulent franchisors

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

pros of LLC

Limited liability Choice of taxation Flexible ownership rules Flexible distribution of profits and losses Operating flexibility

pros of franchises

Management and marketing assistance Personal ownership Nationally recognized name Financial advice and assistance Lower failure rate

cons of LLC

No stock; ownership is nontransferable Fewer incentives Taxes Paperwork

Managing a small business

Planning your business Financing your business Knowing your customers (marketing) Managing your employees (human resources) Deciding on logistics (operations) Keeping records (accounting)

basic forms of business ownership

Sole proprietorship Partnership Corporation (and LLC) Franchise Cooperative (Co-Op)

Small Business Administration (SBA)

US government agency that advises and assists small businesses by providing management, financial advice, and loans

franchisor

a company that develops a product concepts and sells others the rights to make and sell the products ex - mcdonalds, 7-eleven, holiday inn, etc.

c corporation

a state-chartered legal entity with authority to act and have liability separate from its owners

limited partner

an owner who invests money in the business but does not have any management responsibility or liability for losses beyond the investment

franchise agreement

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

Crowdfunding

donation based or debt-investment (peer-to-peer lending)

Financing your business

find potential sources of capital or individual investors

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

acquisition

one company's purchase of the property and obligations of another company

general partner

owner (partner) who has unlimited liability and is active in managing the firm

Consumer market

people with unsatisfied wants and needs who have both the resources and willingness to buy

Angels

private individuals who invest their own money in potentially hot new companies before they go public

merger

result of two firms forming one company