Small Business, Franchises, and Business Structures
Chapter 5: Small Business, Franchises, and Entrepreneurship
Definition and Statistics of Small Businesses
Small Business Administration (SBA) Definition: An independent business with fewer than employees.
Impact and Statistics of Small Businesses in the U.S.:
Represent of all employer firms.
Pay of the U.S. payroll.
Account for of all U.S. exporters.
Factors Influencing Small Business Start-ups
Independence: A primary driver for individuals to start their own business.
Accepting a Challenge: The desire to overcome difficulties and succeed in business.
Family Background: Influence from family members who have owned or operated businesses.
Age Demographics: More than of small business owners are between the ages of .
Advantages and Disadvantages of Small Businesses
Pros (Advantages):
Strong Relationships with Employees: Closer ties and better communication due to smaller scale.
Ability to Adapt to Change: Can react more quickly to market shifts and customer needs.
Simplified Record Keeping: Generally less complex administrative and financial processes.
Cons (Disadvantages):
Risk of Failure: A significant percentage of small businesses do not succeed.
Limited Potential: May have constraints on growth, capital, and market reach compared to larger corporations.
Over Expansion: The danger of growing too quickly without adequate resources or planning, leading to instability.
Key Concepts in Entrepreneurship and Franchising
Business Plan: A comprehensive document that outlines a company's goals, strategies, operations, and financial projections to guide its future development.
Franchise: A business arrangement where a franchisor grants a franchisee a license to operate an individually owned business using the franchisor's established brand, products, and systems.
Appeal of Franchises: Many individuals choose franchising over starting from scratch because the business already has an established customer base and proven model.
Franchiser: The entity (company or individual) that owns the brand, specific store concepts, and grants the rights to operate a franchise to another party.
Franchisee: The individual or business that purchases the right to operate a franchise from a franchisor, operating under the franchisor's established rules and guidelines.
Support Organizations for Small Businesses
Small Business Administration (SBA): A U.S. government agency dedicated to supporting small businesses and entrepreneurs by providing financial assistance, counseling, and various resources to help them start, grow, and succeed.
SCORE (Service Corps of Retired Executives): A non-profit organization that offers free mentoring, workshops, and comprehensive resources to small business owners and aspiring entrepreneurs.
Small Business Development Center (SBDC): A resource center in the United States that provides free or low-cost consulting services and training programs to small business owners and entrepreneurs, often in partnership with universities and state economic development agencies.
Venture Capital: (Term mentioned without a definition in the provided text).
Chapter 4: Business Structures and Corporate Governance
Corporate Structures and Definitions
Board of Directors: A group of individuals, either elected by shareholders or appointed, whose primary role is to represent the shareholders' interests and oversee the strategic direction and activities of a company or organization.
Closed Corporation: A type of business entity characterized by ownership by a small number of shareholders. Its stock is not offered for public sale on a stock exchange.
Corporate Officers: Top-tier executives appointed by the board of directors to manage the day-to-day operations and strategic execution of a corporation.
Corporations (C-corp): A standard legal business structure in the U.S. recognized as a separate legal entity distinct from its owners (shareholders). This separation provides limited liability for owners.
Dividend: A payment made by a corporation to its shareholders as a method of distributing a portion of the company's accumulated profits.
Hostile Takeover: An attempt by one company to acquire another company against the explicit wishes of the target company’s management and its board of directors.
Merger: A corporate strategy where two or more companies combine to form a single entity. This is typically done to strengthen market position, increase operational efficiency, or achieve growth objectives.
Not-for-Profit Corporation: A legal corporate entity established under state law with the primary purpose of pursuing objectives other than generating profits for its owners or shareholders.
Open Corporation: A corporation whose shares are available for purchase by the general public through stock exchanges.
Proxy: A legal authorization that enables one individual to act on behalf of another shareholder, most commonly to cast votes at a company’s shareholder meetings.
S-Corporation (S Corp): A special type of corporation in the U.S. that allows company profits and losses to be passed directly through to the owners' (shareholders') personal income without being subject to corporate tax rates. This structure avoids the