intro to business ch 5

As economy changes —→

There is increased pressure on employees

What’s the result of pressure on employees

Employees losing their jobs

Pressures include: (from changing economy)

• downsizing due to technology

• Technology- 24/7

• Flexible workers

• Consultants; temps; part-time

Business type- producers

Create the products and services used by individuals and other businesses

Extractors (producers)

Take resources from nature for direct consumption or use in developing other products

Farmers (producers)

Cultivate land and use other resources to grow crops

Manufacturers (producers)

Get supplies from other producers and convert them to products

Intermediaries

Businesses involved in selling the goods and services of producers to consumers and other businesses

Retailers (intermediaries)

Sell directly to the consumer

Wholesalers (intermediaries)

Sell to retailers or other wholesalers

“Middleman”

Service business

Carry out intangible goods and activities that are consumed by it customers

Intangible good

A product or service that provides value and utility but has no physical, touchable form

Sole proprietorship

Unincorporated business owned & run by one person where there is no legal distinction between the owner & the business entity

Single taxation

Pay taxes on your personal profits - good thing!!

Advantages of sole proprietorship

• ease of formation

• Single taxation

• Get to be your own boss

• Keep all the profits

Disadvantages of sole proprietorship

• might have to use personal savings or borrow money

• Have to pay for everything yourself

• Might lack business skills

• Unlimited liability (full responsibility for your company’s debts and other legal liability )

Partnership

A business arrangement where two or more people share ownership, profits, managements, and financial or legal liabilities

Partnership agreement

A contract that outlines the rights and responsibilities of each partner

Advantages of a partnership

• ease of formation

• Single taxation

• Each of your partners can contribute money to businesses

• Banks are often more willing to lend money

• Partners can bring different skills

• Division of labor

Disadvantages of a partnership

• might not get along with your partners

• Share unlimited legal and financial liability with your partners

• Have to share profits

• Takes longer to make decisions

Corporation

Legal business structure that exits separately and distinctly from its owners, giving it the rights and obligations of a single person under the law

What do you need to file/ create to start a corporation?

File articles of incorporation and create a corporation agreement

What’s a corporation agreement

A written legal document that defines ownership and operating procedures and conditions for the business

Advantages of a corporation

• Limited liability ( can only lose what you invest)

• Continual existence

• Ease of transfer of ownership

• Attract skilled workers

• Ability to raise a lot of money

Corporation disadvantages

• slower decision making

• More laws

• Double taxation

• Difficult startup

• May end up losing control of your own company

Size of businesses

Largest number of businesses are owned by 1 person; largest number of revenue from corporations

Limited liability company (LLC)

• Combines best features of a partnership and a corporation

• Provides liability protection for its owners

• Easier formation

Non- profit organization

Organized for the benefit of other

Raise money by receiving grants and donations

Mission statement

Conveys what we are and what we want to do

Sets the trajectory for our company and brings purpose to our actions

Objective statement

Determine the objectives and goals for the company

What does the objective statement mean

Explicit, measurable, of a duration and attainable

Objective not subjective !

Objective standard

Something that is measurable by things not influenced by opinion

Subjective standards

Measurement relies on personal opinion

Limited liability

Can only lose what you invest in the company

Unlimited liability

business owners or partners are personally responsible for all debts, loans, and legal obligations incurred by their company