Chapter 8 Business Organizations Starting A Business

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Chapter 8 Business OrganizationsStarting A
Business

• Businesses begin with an idea.
• Entrepreneur person who organizes, manages, and
  assumes the risks of a business in order to gain
  profits
• People start a business to
• Gain profits
• Do something on their own
• Be their own boss

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Starting A Business

• Must gather factors of production to start a new
  business.
• Need to be aware of laws, regulations and tax
  codes.
• SBDC Small Business Development Center
• Startup a beginning business enterprise
• Small Business Administration can help with
  information and financing

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Starting A Business

• State departments of commerce and community
  affairs can help a startup.
• Small Business Incubator government-funded
  agency that assists new businesses by providing
  advice or low-rent buildings and supplies
  (Pottsville)
• May use the internet to gather information.

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Starting A Business

• Elements of Business Operation
• Expenses
• equipment wages insurance
• taxes electricity telephone rent/mortgage
  water sewage
• advertising donations inventory
• accounting postage supplies
• banking internet security
• travel cont. ed. employee gifts
• dues zoning engineering
• inspections contractors building permits
• legal fees software memberships
• scholarships landscaping PACs
• neighbors entertainment product

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Starting A Business

• Elements of Business Operation
• Inventory extra supply of the items used in a
  business, such as raw materials or goods for sale
• Receipts income received from the sale of goods
  and/or services also slips of paper documenting
  a purchase
• Risk can lose - 90 of small businesses fail
• Value of your time is opportunity cost

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Sole Proprietorships

• Sole Proprietorship business owned and operated
  by one person
• Proprietor owner of a business
• Unlimited Liability requirement that an owner
  is personally and fully responsible for all
  losses and debts of a business
• Assets all items to which a business or
  household holds legal claim

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Sole Proprietorships

• Advantages
• Receive all profits
• Few regulations and quicker decisions
• Lower taxes (usually)
• Own boss
• Obtaining credit easier
• Disadvantages
• Losses not shared with others
• Unlimited liability can lose personal assets
• Must handle all decision making
• Time-consuming
• Must rely on own money
• Borrowing large sums may be difficult
• Death, injury, illness, or not working can mean
  business will fail

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Partnerships

• Partnership business that two or more
  individuals own and operate
• Limited Partnership special form of partnership
  in which one or more partners have limited
  liability but no voice in management
• Joint Ventures partnerships set up for a
  specific purpose just for a short period of time

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Partnerships

• Advantages
• Losses are shared
• More efficient with fewer regulations
• Taxes lower
• Pride in owning own company
• Combine allowing for more funds easier
  ability to loan
• Disadvantages
• Share profits
• Unlimited liability
• Disagreements and slower decision making
• Borrowing larger amounts limited
• Partner death or leaving means business must be
  reorganized or ended

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Corporations

• Corporation type of business organization owned
  by many people but treated by law as though it
  were a person it can own property, pay taxes,
  make contracts and so on
• Stock share of ownership in a corporation that
  entitles the buyer to a certain part of the
  future profits and assets of the corporation
• 20 of businesses but 90 of revenue (pg. 221)
• Limited liability requirement in which an
  owners responsibility for a companys debts is
  limited to the size of the owners investment in
  the firm

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Corporations

• Corporate structure
• Registration
• Articles of Incorporation document listing
  basic information about a corporation that is
  filed with the state where the corporation will
  be headquartered
• Corporate Charter license to operate granted to
  a corporation by the state where it is
  established
• Selling Stock
• Common Stock shares of company with voting
  rights
• Preferred Stock shares of company with no
  voting rights but a guaranteed dividend
• Dividend portion of a corporations profits
  paid to its stockholders
• Naming Board of Directors supervises and
  controls the corporation by hiring officers for
  the company

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Franchises

• Franchise contract in which one business (the
  franchiser) sells to another business (the
  franchisee) the right to use the franchisers
  name and sell its products
• Many hotels, motels, gas stations and fast-food
  chains are franchised
• Franchisee pays a fee and a portion of the
  profits to the franchiser
• Some examples McDonalds, Subway, Econo Lodge,
  Curves, Dunkin Donuts, KFC, Pizza Hut