Chapter 4 - Options for Organizing Business (FHF)

Easy and inexpensive to form,
high level of secrecy
Profits belong to the owner
Owner has complete control
Minimum government regulation
Taxes paid only once
Business can be closed easily
May have to use personal assets to Easy to organize General partners have unlimited liability
borrow money higher credit ratings because partners Partners are responsible for each other’s decisions
External funds are difficult to find possibly have more combined wealth Termination of one partner requires a new
Owner must have diverse skills Partners can specialize partnership agreement
Survival of the business is tied to Can make decisions faster than larger Difficult to sell a partnership interest at a fair price
the life of the owner businesses Distribution of profits may not correctly reflected
Qualified employees hard to find Government regulations are few Cant find external sources of funds as easily as can
Wealthy owner pay a higher tax large corporations

Advantages Disadvatanges Advantages Disadvatanges

Businesses owned and Business formed by s:

ty p e
operated by one individual several individuals t n e rship p lete
Par co m
n eral: t and
G e m mg
g in
SOLE PROPRIETORSHIPS PARTNERSHIP sh a r
liabil
in
ity n e ra
l
ed
1 ge limit
ed: st 1
Limit & a t le a
il it y is
ne r , lia b
p a rt hose tm e n
t
ner,w eir inves
p a rt o t h
ed t

Organizing Business Options

limit

e s: ra
T yp y1o
p any ed b
Co m
t e : o n
w c lo sely
Priva ple w
ho
peo ess.
fe w in busin m ay
v o lve d
a n yone
in s t o ck
lic: ade.
OWNERSHIP STRATEGY CORPORATION Pub
bu y,
sell,
u
o r tr
b :
li c ow n
ed b
y

s i- p nt
Q ua nm e
legal entity whose assets & liabilities are over
th e g f it
P ro
separate from those of its owners. N on

Mergers Acquisition Advantages Disadvatanges

Two companies (usually corporations) One company buys most of another
combine to form a new company company’s stock
Leveraged buyout: investors borrow
money to acquire a company, using the
assets of the purchased company to
guarantee the loan
Owners have limited liability
Ownership can be easily transferred
Usually last forever
Raising money is easier
Expansion into new businesses is
simpler because of the ability of the
company to enter into contracts
The company taxed on its income & owners pay
a second tax on any profits received as dividends
Forming a corporation is expensive
Keeping trade secrets is difficult because so
much info must be made available to public
Owners &managers are can have different goals

Diva Tertia Almira - Batch 78 Class A (470320)

 CHAPTER 5 - SMALL BUSINESS, ENTREPRENEURSHIP AND
FRANCHISING (FHF)
Process of creating and managing a
business to achieve desired objectives.
Entrepreneur = person who creates a
business & manages his resources &
takes risks to gain profit
Any independently ownedand
operated businessthat is not dominant
in itscompetitive area and doesnot
employ more than 500people
Provide products, jobs, innovation, and
opportunities
Retailing, wholesaling, services,
manufacturing, high technology & sharing
economy attract small businesses

Why it's
Entrepreneurship Small Business
important?

independence
Freedom of choice
Changing demographic trends Demographic Definition & Advantages Option of working at home
represent areas of opportunity for
Trends
Importance Flexibility
small businesses
Ability to focus on a few key customers
Chance to develop a reputation for quality
and service

Future of Small

Disadvantages
Advantages &
New opportunities for small Small
Business
Technological
companies to expand their operations
abroad, small business has fewer Advances Business &
regulatory and legal barriers Entrepre-
neurship Expense
Physical and psychological stress
High failure rate
Economic turbulence presents both Small businesses fail for many reasons:
Economic Disadvantages
opportunities and threats to the under capitalization, management
Trends
survival of small businesses How to start inexperience, neglect, disproportionate
burdens imposed by government
regulation, and vulnerability to competition
from larger companies.
1 Create 2. Decide 3. Financial 4. Approaches
s are Business Plan Ownership Resource to start
s in esse
u ll.”
ge b sma Sole proprietorship Personal, friends and Start a new business
y lar hink , resourc lves
eful,
Man g to“t le v o Partnership family from scratch
tryin
x ib in
re fle o fte
n
nt Corporation Financial institutions Buy an existing one
s mo fo rt gem
e
firm is ef ana
heir . Th gm , and Other businesses in the Franchise operation
so t v a tive u c in e e s
inno ( re d y
mplo and
and nsiz
ing o ff e s) e form of trade credit
dow s, laying ork task loye
r w em p investors (venture
laye u c ing h e n an lo p ing
re d e ger
hip,w for dev e lar capitalists)
e u rs ity in th
p re n sibil with
intra respon d State and local
s y kin
take ns of an ization.
o v atio o r gan organizations
inn

DIVA TERTIA ALMIRA - BATCH 78 CLASS A (470320)