Business Chapter 5 and 6
an independent entity with fewer than 500 employees that is not dominant in its market.
Small manufacturers employees
fall in 500 worker range.
fewer than 100 workers.
Most likely to be a Small Firm?
Home builders, florists, hair salons, auto repair, and funeral homes.
Less Likely to be a small firm?
Hospitals, nursing homes, paper mills, electric utilities.
Small Business Jobs Act
may help give a further boost to these job numbers by raising the dollar amount of small business loans available to companies.
lack of people skills, inadequate knowledge of finance, inability to track inventory or sales, poor assessment of the competition, or simply lack of time.
Small Business Administration(SBA)
principal government agency concerned with helping small US firms.
small-business loan often used to buy equipment or operate a business.
company that helps new and startup companies to develop by providing services such as management training or office space.
business ownership in which there is no legal distinction between the sole proprietors status as an individual and his or her status as a business owner.
association of two or more persons who operate a business as co-owners by voluntary legal agreement.
a form of legal organization with assets and liabilities separate from those of its owners.
a form of business organization in which the entity does not pay corporate taxes on profits, instead, profits are distributed to shareholders, who pay individual income taxes.
business entity that secures the corporate advantage of limited liability while avoiding the double taxation characteristic of a tradition corporation.
business arrangement in which workers buy shares of stock in the company that employs them.
organization whose goals do not include pursuing a profit.
also known as a cooperative, where the owners join forces to operate all or part of the activities in their firm or industry.
allow small businesses to pool their resources on purchases, marketing, equipment, distribution, and more. They can share equipment and expertise.
a firm operating in the state that it was incorporated.
When a company does business in states other than the one where it has filed incorporation papers.
A firm that is incorporated in one nation that operates in another nation.
owner of a corporation due to his or her purchase of stock in the corporation.
Board of Directors
sets overall policy, authorizes major transactions, and hires the CEO.
CEO, COO, and CFO. Manage overall operations, make major decisions, and introduce major savings.
Branch managers, plant managers, division heads/directors. Manage operations, and serve liaisons between top management and other levels.
Supervisors, and department heads. Coordinate day-to-day operations, supervise employees, and evaluate staff performance.
shares that give owners limited voting rights, and the right to receive dividends or assets before owners of common stock.
shares that give owners voting rights but only residual claims to the firm's assets and income distributions.
CEO and CFO's
make the most corporate decisions, and are bound by strict regulations such as verifying in writing the accuracy of their firm's financial statements.
agreement in which two or more firms combine to form one company.
agreement in which one firm purchases another.
agreement that combines firms operating at different levels in the production and marketing process.
agreement that joins firms in the same industry for the purpose of diversification, increasing customer bases, cutting costs, or expanding product lines.
agreement that combines unrelated firms, usually with the goal of diversification, spurring sales growth, or spending a cash surplus in order to avoid a takeover attempt.
partnership between companies formed for a specific undertaking.
a person who seeks a profitable opportunity and takes the necessary risks to set up and operate a business.
a written document that provides an orderly statement of a company's objectives, methods, and standards.
initial funding used to launch a company.
money an entrepreneur raises from others to help start or expand a business.
borrowed funds that entrepreneurs must repay.
funds invested in new ventures in exchange for part ownership.
a business organization or group of individuals that invests in early stage, high-potential, and growth companies.
a wealthy individual who invests money directly in new ventures in exchange for equity.
a source of financial support involving groups of individuals, often connected through the internet, that pool small sums of money to support new businesses as well as philanthropic causes and artistic endeavors.
a person who identifies a business opportunity and allocates available resources to tap that market.
person who starts one business, runs it, and then starts and runs additional businesses in succession.
a person who recognizes societal problems and uses business principles to develop innovative solutions.
contractual business arrangement between a manufacturer or other supplier and a dealer, such as a restaurant operator or a retailer.
individual or business firm purchasing a franchise.
firm whose products are sold to costumers by the franchisee.
Process of promoting innovation within the structure of an existing organization.
project initiated by an employee who conceives an idea, convinces top management of its potential and then recruits human and other resources from within the company to the idea into a commercial project.
Advantages of Sole Proprietorship:
owner retains all profits, easy to form and dissolve, owner has flexibility.
Advantages of Partnership:
easy to form, can benefit from complementary management skills, can expand financial capacity.
Advantages of a Corporation:
limited financial liability, specialized management skills, expanded financial capacity, economies of large-scale operations.
Disadvantages of Sole Proprietorship:
unlimited financial liability, financing limitations, management deficiencies, lack of continuity.
Disadvantages of Partnership:
unlimited financial liability, interpersonal conflicts, lack of continuity, difficult to dissolve.
Disadvantages of Corporation:
difficult and costly to form and dissolve, tax disadvantages, legal restrictions.
Characteristics of an Entrepreneur:
vision, high energy level, need to achieve, self-confidence and optimism, tolerance for failure, creativity, tolerance for ambiguity(unclear), and internal locus of control(self control).
Advantages of Entrepreneurship:
unsatisfied with traditional work world, want more flexible schedule, want to turn vision into a profitable business, be their own boss, and achieve financial success.
opportunity for expansion, managing a larger business with few employees.
for the franchisor, if its franchisees fail in any way, the failure affects the brand as well as bottom line, and the firm can be mismanaged at the top level.