Chapter 5: Launching a Business Flashcards
What is an ENTREPRENEUR?
- a person who creates a business in the hope of earning a profit
- a person who organizes, manages, and assumes risks of a business enterprise
What four things must an entrepreneur do in order to make a profit…?
- create a useful product
- have an efficient method of production
- finance production
- market the product at a profit
What is PROFIT?
what remains after the cost of doing business has been deducted
What is another name for profit?
residual
What are the three forms of business organizations?
- sole proprietorship
- partnership
- corporation
What is SOLE PROPRIETORSHIP?
a business owned by one person
What is a PARTNERSHIP?
an unincorporated business that is owned by two or more people
What is CORPORATION?
a business organization created under a government (state) charter
What is the most common form of business organizations?
sole proprietorship
What are 5 advantages of a sole proprietorship?
- easiest and least costly
- you own all profits
- you are your own boss
- minimal legal restrictions
- do not have to pay corporate income tax
What are 3 disadvantages of a sole proprietorship?
- unlimited liability
- difficult to raise money
- lack of business continuity
What is UNLIMITED LIABILITY?
- The taking of personal property to satisfy a business debt
- the owner must assume full responsibility for all losses in cured by the business
What is A LACK OF BUSINESS CONTINUITY?
if the owner withdraws the business will end
What form of business makes up 10% of the total and 6% of the total money?
partnership
What form of business makes of 70% of total and 6% of total money?
sole proprietorship
What are three advantages of a partnership?
- additional funds
- two heads are better than one
- no corporate tax
What are four disadvantages of a partnership?
- unlimited liability
- if a partner dies or withdrawals the partnership as legally terminated
- amount of capital is limited
- Partners can have a falling out which may lead to death
What is a CREDITOR?
someone that lends money to another
What is a DEBTOR?
someone that receives or owes money to another
What is the difference between a creditor and a debtor?
A creditor lends the money whereas the debtor owes the money
What form of business makes up 20% of the total and 90% of the total money?
Corporation
What is a STOCKHOLDER?
- owners of shares of stocks and a corporation
- considered an artificial person
• can do everything a person can do but it is not you
What are four advantages of a corporation?
- Limited liability
- ease of transfers
- unlimited life
- tax advantages
What are four disadvantages of a corporation?
- expensive to organize
- some corporations are subject to special taxes or double taxes
- Open or public corporation
- liability
What is LIMITED LIABILITY?
you can’t lose more than you put in
What is EASE OF TRANSFER?
you can buy or sell anytime
What is UNLIMITED LIFE?
The company goes on even if the CEO dies
What is OPEN PUBLIC CORPORATION?
corporations that sell stock give up their right to secrecy
What is LIABILITY?
any claim on the debt of the business or individual
What are the five niches?
- S-Corporation
- nonprofit
- Government owned corporation
- cooperative corporation
- franchise
What is an S-Corporation?
Corporation for small businesses that has all the advantages of a corporation but you don’t pay the corporate tax
What is a NON PROFIT CORPORATION?
it’s service some educational social charitable or religious purposes rather than simply earning a profit
What is a GOVERNMENT OWNED CORPORATION?
provide services that private enterprise is unable or willing to offer
What is COORPORATIVE CORPORATION (CO-OP)?
an association of individuals or companies whose purpose is to perform some business function for its members
What are the three types of cooperative corporations (co-ops)?
- housing
- consumer
- producer
What is a HOUSING CO-OPS?
multiple dwelling units owned by the tenants (condos)
What are CONSUMER CO-OPS?
businesses owned by members who share in the profits or who purchase goods at a lower price
What are PRODUCER CO-OPS?
manufacturer and market products on behalf of their members
What is a FRANCHISE?
individually owned businesses as if it were part of a large chain
What is a CHARTER?
A license issued by the secretary of state of the state in which the corporation is headquartered
What are BYLAWS?
The rules of operation for corporations stated in the charter which governs officers actions
What three things do the Board of Directors do?
- choose president and other officers
- decide how they get their money
- choose if dividends are to be paid
What is the object of the board of directors?
separate ownership from management
Who elects the Board of Directors and how do they do it?
Stockholders
- 1 vote per share of stock
- vote at annual meeting
~ your proxy votes for you if you can not attend the meeting
What is a PROXY?
written authorization temporarily transferring voting rights to another at a meeting
What is an ANNUAL REPORT?
Report sent to stockholders containing pregnant finance information
What is a PROSPECTUS?
Report providing info on the company you MIGHT invest in
What is PRODUCT QUALITY?
once quality has been established it should not be lowered
What is QUAITY CONTROL?
maintenance of standards
What is PRODUCT RELIABILITY?
does what its supposed to do
What are the three functions of PRODUCT PACKAGING?
- to protect the product
- provide info
- enhance appearance
What are results of product packaging?
- could lead to higher prices
- if mass marketed could lead to lower prices
What is PRODUCT LABELING?
some products carry testing labels from private organizations
What is CONSUMER SAFTEY?
responsibility to safeguard consumers and their property in the storage and use of the product
What is another name for consumer safety?
product responsibility
What is MICROTEEN?
natural mix of computers and young people
Between what ages do most people start their own business?
26-40
What is the con of starting your own businesses with training from a college program?
you have to pay a higher price
True or false children of business families are not likely to go into business themselves if they see their parents business fail
FALSE!
children of business families are more likely to go into business themselves despite the business success rate of their parents
What is a DISLOCATION OF A JOB?
loss of a job
What is a SMALL BUSINESS?
any company with less than 500 employees
True or False, small businesses accounted for 39% of the GMP
TRUE
small businesses did account for 39% of GMP but this is been declining because of the advantages of big businesses
What is SCALE?
large
What are two advantage of scale businesses?
- mass marketing
- buying in bulk
What are the two sectors of small business by industry and what percentage do they take up?
- retail service 29%
- services 28%
True or false the smaller the firm the more likely it is to survive
FALSE!
The larger the firm the more likely it is to survive
Businesses have a 30% chance of surviving four years if they have how many employees
1-20
Businesses have a 54% chance of surviving four years if they have how many employees?
21-50
What are four problems small businesses face
- taxes
- slow sales
- competition
- difficulty in raising money
What are three advantages of a small business
- can react quickly to changing times
- 80% of new jobs are being created
- two times more innovations per employees at scale businesses
What is the first thing you do when starting a small business?
contact the small business administration (SBA)
What is the formal organization of a large scale corporation?
1) stockholders
2) board of directors
3) president
4) vice president
5) department heads
6) workers
What is a disadvantage of a large business?
The corporations that pays dividends are subject to double taxes. First the company pays a corporate tax. Second the dividend holder pays another tax.
