Ch. 8-11

Sole Proprietorship

A type of business owned and operated by a single individual, where the owner is personally liable for all debts and obligations.

Unlimited Liability applies to general partnerships and sole proprietorships

refers to the financial responsibility of a sole proprietor for all business debts and losses, making their personal assets vulnerable to claims.

Venture Capitalists

Investors who provide funding to startups and small businesses in exchange for equity. ie shark tank

angel investors

wealthy individuals who invest their personal funds in less promising startups, offering capital in exchange for ownership equity or convertible debt. They often provide early-stage funding and mentorship to entrepreneurs. Different than venture capitalist as they invest with own money and other drive beside profits

Crowdfunding

A method of raising capital through small contributions from a large number of people, typically via online platforms. This allows entrepreneurs to fund their projects while engaging their community. using social networking to potential investors

Advantages Starting Sole Propietorship

1. easy to start up and leave

2. Flexibility in decisions as owners are sole decision makers

3. owner keeps all profits

4. not recognized as separate legal entity so owners only pay individual income on profits earned but not business itself not taxed

5. Psychological satisfaction

6. Easy to get out of business

Disadvantages of Sole Propietorship

1. Unlimited liability

2. Difficult to raise financial capital; expansion and set up - banks are reluctant to loan

3. Small size, hire more ppl, need to carry min inventory

4. Limited managerial experience - owner

5. difficulty attracting qualified employees - compeition

6. limited life

Incubators

places where entrepreneurs can receive thee training and other assistance to build a successful start up business

Accelerators

rapidly propel ventures (3-6 months) via cohorts, mentorship, and funding in exchange for equity

Limited Life

situation in which a firm legally ceases to exist when an owner dies or quits, or a new owner is added, applies to sole partnerships and partnerships

Partnerships

unincorporated business owned and operated by two or more people who share the profites and have unlimited liability for the debts and obligations of the firm

General Partnerships

simplest, form of partnership where all partners are jointly responsible for management and debts

limited partnerships

form of partnership where one or more partners are not active in the daily running of the business and whose liability for the partnership’s debt is restricted to the amount invested in the business

Limited Liability Company (LLC)

form of partnership which owners cannot be held responsible for the debts of the business

Forming a partnership

Easy to start, handshake, legal papers drawn up to specifiy arrangments state how the expected profits or losses can be divded

Advantages of Partnership

1. Ease of start up - only minimal legal fees

2. Ease of management - each partner brings diff area of experts, freedom for minor decisions and has time to talke with for big decisions

3. Lack of separate taxes on partnership income 0 partners earn profits from firm and then pay individual income taxes quarterly or end of year - submit diff schedules to Internal Revenue Service info

4. Usually attract financial capital easier than proprietorships - large and better chance getting bank loans + existing partners could take new partners for financial capital

5. More efficient - larger size (med ¾ partners accounting investment 100+)

Disadvantage of partnerships (general)

each partner is responsible for acts of all other partners - unlimited liability

Disadvantage of limited partnerships

limited partner’s responsibility for debts of business is limited by size of their investment general partners paid rest

Disadvantages of partnership

1. Limited life

2. potential conflict between partners

Corporation

form of business organization recognized by law as separate legal entity with all the rights and responsibilities of an individual, including right to buy and sell property enter legal contracts and to sue and be sued

Forming a corporation

Formal and legal

file for permission to create a coporation from government with charter

which also specifies number of stocks/ownership certificates in firm which are sold to investors (stockholders/shareholders) money from this is used to set up

Charter

written government approval to establish a corporation includes company name, address, purpose of business, number shares of stock, and other features of the business

Stockholders

people who own a share or shares of stock in a corporation: same as shareholders

stock

certificates of ownerships in a corp; common or preffered stock

Dividend

check paid to stockholders, usually quarterly, representing a portion of corporate profits

Limited Life

situation in which a firm legally ceases to exist when an owner dies or quits or a new owner is added: applies to sole proprietorships and partnerships

inventory

stock of goods held in reserves; includes finished goods waiting to be sold and raw materials to be used in production

Corporate Structure

Common stock, Preferred Stock

Common Stock

most basic form of corporate ownership, generally with one vote per share for stockholders, setting broad policies and goals also hire a professional management team to run business

Preferred stock

form of stock without vote, in which stockholders get their investments back before common stockholders recieving dividends before too

advantages of corporation

1. ease of raising financial capital - sell additional stock to investors

2. limited liability for its owners, corp itsel is fully responsible for it’s debts and other obligations - stockholders losses are limited to value of the corp’s stock

3. Corporations board of directors can hire professional managers to run the firm - stockholders don’t need to know much about business

4. Unlimited life separate legal entity

5. Ease of transfering ownership of corporation - selling stock

Bonds

formal contract to repay borrowed money and interest on the borrowed money att regular future intervals

Principal

Amount borrowed when getting a loan or issuing a bond

Interest

payment made for use of borrowed money; usually paid at periodic intervals for long term bonds or loans

Disadvantages of corporation

1. Double taxation

2. Difficulty and expense for a charter

3. The shareholders-owners have little voice on how business is run voting for board of directors, directors turn day to day management to professional management teams - separation of ownership and management

4. corporations subject to more government regulations - register in state, sell stock Federal Securities and Exchange Commission (SEC) financial reports sales and profits for public - buy or combine - gov approval

Franchises

Business investment that involves renting or leasing another successful business model

Franchisor

Creator and owner of business model that is rented or leased by investors

Franchisee

person that invests in the business model of the francisor with his or her own money and start up costs

owner franchisee

intial franchise fee and monthly royalty fee, name brand items w/full range items, benefit from company support (ads, training, toll free support, field ops and evaluations

advantages of franchises

franchisee: National wide network with respected product, diverse products, excellent quality standards, national ads, professional advice

franchisor: more locations, no need to build/exapand, less financial risk and liabilities of employees on owner of branches, profits from royalty fees

disadvantages of franchises

• expense start up cost on owners

• expense to ternimal contral before contract ends

Ponca City

EPA says violation of Clean Air Act from Contiental Carbon factory, claimed carbon black enters air then combines chem with other atmos chem changing to pure care carbon black released when CC factory off duty so no lead to lawsuit and the CC paid 10.5 mil class action lawsuit but then EPA ext CC deadline install emision control devices → more concerns

Income Statement

report showing a business sales, expenses, and profits for a certain period usually 3months or a year

Net Income

measure of business profits determined by subtracting all expenses, including taxes from revenues

Depreciation

gradual wear on capital goods - non cash charge the firm takes for the general wear and tear on capital goods

Depreciation (noncash exchange)

1. expense lowers the amount of income subject to taxes

2. money stays in firm than being paid to someone else - does not reduce cash at hand

Cash Flow

total amount of new funds the business generates from operations; broadest measure of profits for a firm because it includes both net income and noncash charges

Retained earnigs

net earnings or profits a company can reinvest in its operations after all other expensive like dividends are met

Merger

Combination of two or more business enterprises to form a single firm

Types of MERGERS: Horizontal

combination of firms producing same kind of product

Types of MERGERS: Vertical

combination of firms involved in different steps of manfacturing, marketing, or sales

reasons for merging: faster growth

sizes and sales appear to grow faster

reasons for merging: synergy

idea when firms combine, they will take the best characteristics of each to become better and stronger company. - one makes three

reasons for merging: economies of scale

larger size allows for lower cost of production, manfac, sales, others like closing some branch locations

reasons for merging: diversification

driven by desire to acquire new product lines

reasons for merging: eliminations of rivals

sometimes firms merge to catch up with or even eliminate rtivals

reasons for merging: charge of lose corporate identity

help lost/change corp identity like if airline crashed, merge to change names and reputation

Conglomerates

firm with four or more businesses making unrelated products with no single business responsible for majority of it’s sales

Main reason for conglomerate mergers

Diversification hope to protect overall sales and profits by not putting eggs in one basket

Multinationals

corporation producing and selling without regard to national boundaries and whose business activities are located in several different countries

Cooperative ventures (elite unis and top companies)

a business arrangement or project where two or more parties (individuals, firms, or organizations) join forces to pool resources, share risks, and achieve mutual goals.

Site

the exact location of a business or industry

Situation

business’s proximity to its consumers or to the source of its inventories or necessary raw materials

Site factors manufacturers

1. availability, cost of labor

2. availability of suitable infrastructure - highway, RR, port facillities, etc

3. Suitable land for factory construction

Situation factors manufacturers

vary on product and raw materials

Bulk losing industries

industries that prefer to be close to raw materials to lose unnecessary materials since finish product is lighter, easier and cheaper to transport like steel

Bulk gaining industries

prefer to have factories closer to market for finished product - soft drink industry, potato chips

Location of Retail Facilities

consider difference of location range and threshold

Range

the distance people are willing to travel to visit location where product is sold

Threshold

the minimum proportion of people in a store’s range needed for the store to be profitable

Cooperative (Co-op)

nonprofit association performing some kind of economic activity for the benefit of its members

Consumer Cooperative

voluntary association that buys bulk amount of goods such as food or clothing that can be sold to members at lower prices

Service Cooperative

provides services like insurance, credit, child care to it’s members, rather than goods - credit union

producer cooperative

made up of producers like famers and helps members promo/sell products directly to markets, consumers, or companies that use the members’ products - Ocean Spray cranberry co-op mark their products directly to consumers

Labor Unions

organization that works for it’s members’ interest concerning pay, working hours, health coverage, fringe benefits, and other job related matters

Collective bargaining

process of negotiating between union and management representatives over pay, benefits, and job related matters

Professional associations

profess societies, trade associations or academies, specialized occupation interested improving working conditions, skill and public perceptions of professtion Amer. Med. Assoc.

Business Associations

local chamber of commerce, an org that promotes welfare of its member businesses (edu progams to lobbying for favorable business legislation)

Chamber of Commerce

nonprofit organization of local businesses whose purpose is to promote their interests

Better Business bureau

business sponsored nonprofit organization providing information on local companies to consumers

Government direct role

supplies good/service that competes with the same type of goods and services provided by private businesses

Tennessee Valley Authority

supplies electrical powel to Tenn. Alabama, Geogiia, Ken, N. Carol, Vir, Missi

Federal Deposit Insurance Corporation

insures our deposits in our nation’s bank

USPS

competes with fedex and UPS

Indirect role og gov

acts as umpire to help the market econ operate smoothly and efficiently - not encourage direct compeition

Antitrust laws

Sherman Antitrust Act of 1980 making monopolies and combinations in restraint of trade illegal, indirect impact prevent firms from combing to make monopoly

College Scholarships

encourage kids to go to college, long run impact of creating edu workforce, more productive, earn more $$, pay more taxes

Social Security Payments

purchasing power keeping out of poverty - w/o directly competing with comp

Strike

union organized work stoppage designed to gain concessions from an employer

picket

demonstration or march outside a place of buisness to protest a company;s actions or policies

boycott

protest in the form of refusal to but, including attempts to convice others to do the same

lockout

refusal to let employers to work until they agree to management demands

Right to work

prohibit employers from requiring to join unions

Union shop

workers do not need to be members to be hired but must join soon after remain unionized while an employee

Closed Shop

an employer who only hires union members

Modified union shop

workers don’t have to be union members to be hired and cannot be force to join to keep job, but if they chose to join a union they must remain a member while employed

agency shop

shop does not require workers to join union to get or keep job, but workers must pay union dues to fund collective bargaining nonunion workers are subject to contracts negotiated by unions regardless of whether or not they agree

Industiral Union

Labor union whose members perform diff kinds of work in same industry

Craft union

labor union whose members perform the same kind of work; same as trade union