BBI201: Types of Business p.1

What is the difference between a invention and an innovation

An invention is an original idea or concept typically solving a problem, an innovation is an improvement to a previously invented product, like changing how it’s used.

Patent

Gives the owner the sole right to make, use, or sell an invention for a set amount of time.

Copyright

Give someone the exclusive right to publish, produce, sell, and distribute music art, works of literature, and software

Licensing Agreement

When the inventor allows another business to use their invention for a fee, the inventor receives a royalty fee.

Selling The Rights

The inventor sells and gives up complete control of their invention

What is SWOT used for

Evaluating Ideas

What does SWOT stand for

Strengths, Weaknesses, Opportunities, Threats

Explain the basic characteristics of a sole proprietorship

Solely owned, Small Staff, Single person has lots of roles and responsibilities

3 Advantages of Sole Proprietorship

Owner gets all profits
Owner can try new things and make all decisions
Very fulfilling, personal satisfaction

3 Disadvantages of Sole Proprietorship

Unlimited liability
Owner may not have expertise in all areas of business
Financing may be difficult

Limited Liability

Owner is personally responsible for all debt to creditors (eg. they can come after your assets)

What are the basic characteristics of a partnership

Owned by two or more persons
Generally formed in order to share expenses and expertise
Written partnership agreement

3 Advantages of Partnership

Share decision making, Shared ideas, Shared Responsibilities
Easier to borrow money
Possibility of more capital than sole proprietorship

3 Disadvantages of Partnership

Limited capital may restrict the size
Unlimited liability
Sharing of profits
Possibility of conflict

Why do companies incorporate

Raise Funds (rather than get a loan which can put you in debt, and you have to pay back)
Limited liability

What do companies sell when they incorporate their business

Shares

Characteristics of a corporation

A separate legal entity
Limited Liability
Not always big and can be private or public

3 Advantages of a corporation

Shared decision making
Shared responsibilities
Can easily raise capital
Limited liability

3 Disadvantages of a corporation

Inability to give every customer personal attention
Costly to startup
Double taxation (taxes on profits and dividends/earnings)

What is limited liability

Debts are limited to company assets (eg. they can't come after your house)

What is a charter

A collection of documents that is created when a business is incorporated that outlines the rules and regulations by which a corporation is to be governed

Proxy

A shareholder giving their right to vote to another shareholder when they don’t want to vote

Shareholders

Have the right to vote on company decisions, elect the board of directors, receive a percentage of companies profits.

What is a Board of Directors? What are their major responsibilities

A board of directors is elected by shareholders and directs the overall affair of the company, and appoints executive officers.

Who is the Executive

The executive officers are CEO CFO COO, or in smaller companies Presidents, VP's and Directors

Who makes one up and what are their major responsibilities

The board of directors appoint them and they decide company objectives, responsible for running areas of the organization

How does a cooperative work

Business owned and operated by a group of people with a strong common interest
One member one vote
Each member receives their “wage” in the form of a patronage refund
Purpose is service not profit

3 Cooperative Advantages

Member help run the business
Lowered risk level
Limited liability

3 Cooperative Disadvantages

Members will have same amount of control
Difficult to make decisions
Commitment will vary leading to resentment

Patronage Refund

A sort of credit to purchase something from a cooperative that you receive after making a contribution that you can use to purchase something from the cooperative.

What is a franchise? Who is a franchisor? A franchisee?

A franchise is sold by a franchisor to another person a franchisee that essentially sells the rights to use the business name and sell products and services in a given area

What is drawn up when a franchisee purchases a franchise

A franchise agreement

3 Advantages of a franchise

Personal ownership
Proven track record and recognition
Location choice

Advertising is done for you

3 Disadvantages of a franchise

Expensive to buy
Pay ongoing royalty fees
Many rules and regulations

Who are the owners of a crown corporation

Government
Federal/provincial/municipal shareholders

3 Examples of Crown Corporation

Canada Post
Bank of Canada
CBC

Why are crown corporations established

To create essential services for the people of their countries
To ensure there are no monopolies and ensure competition

What is the difference between a public corporation and a private corporation

Public has lots of shareholders and is open to the public
Private only has up to 50 shareholders and the owner typically owns majority

Assets

Anything a business or person owns of dollar value

Collateral

Assets that borrower offers the lender, as a guarantee eg. property for repayment of loan

Share

A unit of ownership in a corporation

Dividends

A part of a corporation's profit shareholders receive

Unlimited Liability

The business owners are fully legal responsible for all business debts, meaning in the case of bankruptcy the bank can go after your assets

Limited Liability

Means that owners aren’t personally liable of debts to the business (the bank cannot go after personal assets)

4 ways to evaluate an innovation/invention?

* SWOT

Feasability
* Profitability
* Marketability

Why do companies sell shares in their business?

To raise funds without borrowing from financial institutions. This helps them expand and develop new products

**Explain why you would or would not want to be an entrepreneur. (Give at least 3 reasons for your answer)**

**Advantages**

Be your own boss

Fulfilling

Potential large income, you get all the profit

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**Disadvantages**

Unlimited liability

Lots of time and effort needed to start

Risk of losing money

Large responsibility commitment

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**4 benefits of entrepreneurship to society**

Job creations: multipler effect

Political: increased infastructure → 3 main types of tax, income, business and hst

Increased standard of living: new inventions/innovations enhance our lives (typewriter→computer)

Economic: cheaper prices (more competition), creates new interpersonal ideas

ex. compter made software, hardware product creations