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