RSM100 Week 2: Forms of Business Ownership, Franchising, and Entrepreneurship

Vocabulary flashcards covering core concepts from RSM100 Week 2, including ownership structures, share classifications, financing types, business models, and entrepreneurship.

Sole proprietorship

A form of private business ownership with one owner who takes on the risk, receives the rewards, and has direct personal liability for the business.

Partnership

A form of private business ownership where two or more persons operate a business as co-owners.

Corporation

A legal business organization with assets that exists separate from its owners, featuring limited liability, tax deferral, and perpetual life, but subject to double taxation and slower decision-making.

Perpetual life

An advantage of a corporation where the company continues to operate even after the owners die.

Preferred shares

A class of ownership shares in a corporation that can include specific features such as being convertible, redeemable, participating, cumulative, or callable.

Convertible preferred shares

Preferred shares that have the option to be converted into common shares.

Redeemable preferred shares

Preferred shares that allow the shareholder to cash them in.

Participating preferred shares

Preferred shares that entitle the holder to receive leftover earnings on top of their fixed dividends.

Cumulative preferred shares

Preferred shares that require the company to owe and eventually pay any dividends that were not issued in a previous year.

Callable preferred shares

Preferred shares that the issuing company retains the right to buy back from the shareholder.

Common shares

Corporate shares whose owners are the only ones with voting rights, receive what is left over, and stand to gain and lose the most.

Board of directors

A governing body elected by shareholders to oversee the corporation.

Corporate officers and managers

Individuals appointed to make major corporate decisions and manage ongoing day-to-day operations.

Franchising

A contract-based business arrangement between a manufacturer or supplier (franchisor) and a dealer (franchisee) to produce and market the supplier's goods or services.

Seed capital

The initial funding needed to launch a new venture.

Debt financing

Borrowing money that must be repaid with interest, which allows owners to maintain control and deduct interest expenses on taxes, but carries bankruptcy risk.

Equity financing

Raising capital by selling a portion of ownership in the business, which lowers bankruptcy risk relative to debt but distributes profits via non-tax-deductible dividends.

Business plan

A written document providing an orderly statement of company goals, methods, and purpose, including its mission, vision, unique advantages, target customers, and competition.

Internal locus of control

An entrepreneurial characteristic where an individual feels personally in control of their own outcomes.

Mice (David Birch model)

Small businesses representing the majority in Canada ($94.7\%$ employ fewer than $50$ people) that can change direction quickly and do not aspire to grow large as long as they stay attractively profitable.

Gazelles (David Birch model)

Firms driven by radical innovation and new technology seeking rapid growth and above-average profitability, defined by growing by $20\%$ per year for four years to double in size.

Elephants (David Birch model)

Large, well-known firms with strong marketplace power that find it difficult to change direction quickly and have fired more people than they hired in the past $25$ years.