Module 1: Entrepreneurs,SBA,Functions of Management,Types of Businesses (Q3) Flashcards
Small Business
A business with growth potential that is small compared to large companies in an industry, has geographically localized operations, is financed by only a few individuals, and has a
small management team.
Entrepreneur
A person willing to create value, in either a new or an existing business, while assuming both the risks and the rewards for his/her efforts
Three Types of Small Companies
- These categories are based on their growth potential
1. Microbusinesses
2. Attractive Small Firms
3. High-Potential Ventures
Microbusinesses
- lifestyle businesses
- A small firm that provides minimal profits to its owner.
Attractive Small Firms
A small firm that provides substantial profits to its owner.
High-Potential Ventures
- Gazelles
- A small firm that has great prospects for growth.
Types of Entrpreneurs
Second Stage Entrepreneurs
Franchisees
Social Entrepreneurs
Entrepreneurial Teams
Intrapreneurs
Second Stage Entrepreneurs
An established firm is purchased or taken over by a second-generation family member or another individual who may have been managing the company
Franchisees
An entrepreneur whose power is limited by a contractual relationship with a franchising organization
- Franchisor provides support in operating the business
- Franchisee will pay a portion of the company’s profits to the franchisor (and an annual franchising fee)
Ex. Buying a McDonalds
Social Entrepreneurs
Entrepreneurial activity whose goal is to find innovative solutions to social needs, problems, and opportunities
Entrepreneurial Teams
Two or more people who work together as entrepreneurs on one endeavor
Intrapreneurs
An existing corporation involving an employee who
assumes the responsibility for taking a new idea and converting it into a profitable product, service, or a process
Small Business Administration
- The U.S. Small Business Administration helps Americans start, build, and grow businesses.
- Offers Local Support to Small Businesses
- Offers Free Business Counseling
- Offers Guaranteed Business Loans
- Helps with Disaster Loans
7(A) Loan Guarantee Program
A loan program that helps small companies obtain financing through a guarantee provided by the SBA.
The loan proceeds can be used for working capital, machinery and equipment, furniture and fixtures, land and building, leasehold improvements, and debt refinancing (under special conditions).
Certified Development Company
(CDC) 504 Loan Program
- An SBA loan program that provides long-term financing for small businesses to acquire real estate or machinery and equipment.
The borrower must provide 10 percent of the cost of the property.
7(m) Microloan Program
- An SBA loan program that provides short-term loans of up to $50,000 to small businesses and not-for-profit child care centers.
- The loan can be used for working capital or the purchase of inventory, supplies, furniture, fixtures, machinery, and equipment.
Small Business Investment Companies (SBICs)
Privately owned banks, regulated by the SBA, that provide long-term loans and/or equity capital to small businesses.
Small Business Innovative Research (SBIR) Program
An SBA program that helps to finance small companies that plan to transform laboratory research into marketable products.
Functions of Management
Planning
Organizing
Directing/Actuating
Evaluating/Controlling
Planning
- That function of determining in advance what needs to be accomplished to achieve a particular goal
- Developing a Mission Statement
- Setting Goals
- Setting Objectives
Organizing
Using all resources; human resources, materials, processes etc. to meet goals
- Specifics are decided
- Creates team environment
Directing/Actuating
- A process in which the managers instruct, guide, and oversee the performance of the workers to achieve predetermined goals.
- This can be achieved by removing obstacles, creating a pleasant environment, and placing the proper resources in place.
Evaluating/Controlling
- Compares organizational and individual performance with predetermined standards or expected results
Manufacturing Business
A business that makes finished goods from raw materials by hand or machinery
Merchandising Business
A business that purchases finished goods for resale
Service Business
A business that provides a service as opposed to a product
Common Legal Forms of Organization
Sole Proprietorship
Partnership
Corporation
LLC
Sole Proprietorship
A business owned by one person, who bears unlimited liability for the enterprise
- AD:Simplest and cheapest way to start a business
- AD: Owner holds title to all firm’s assets and receives all the firm’s profits
- DIS: Owner is subject to claims of creditors
- DIS: Owner must bear all risk, pays all debts
- DIS: Death of owner terminates business
- DIS: Owner bears unlimited liability
Partnership
A legal entity formed by two or more co-owners to operate a business for profit
AD: Faster business setup
AD: All aspects of business are shared
DIS: Share profits and losses equally (unless agreed to a different ratio)
DIS: Owners share unlimited liability
DIS: Personal conflicts
DIS: Decision-making may be harder
DIS: Owners must share equal parts
Types of Partnerships
Limited Partnership
General Partner
Limited Partners
General Partner
A partner in a limited partnership who has unlimited personal liability.
Limited Partner
A partner in a limited partnership who is not
active in its management and whose liability is limited to his or her investment.
Limited partnership
A partnership with at least one general
Partnership Agreement
- A document that states explicitly the rights and duties of partners
- A written agreement should be signed before venture is launched
Unlimited Liability
Liability on the part of an owner that extends beyond the owner’s investment in the business
Joint and Several Liability
The liability of each partner resulting from any one partner’s ability to legally bind the other partners
Corporation
A business organization that exists as a legal entity and provides limited liability to its owners
AD: Continuity in existence
AD: Ease of ownership
AD: Limited Liability
AD: Large Financial Capability
DIS: Legal restrictions on activities
ownership in a corporation is readily
transferable upon death
DIS: Separation of ownership/control
DIS: Lack of personal interest
DIS: Double taxation of earnings
Types of Corporations
Legal Entity
C Corporation
S Corporation
Legal Entity
A business organization that is recognized by the law as having a separate legal existence.
C Corporation
An ordinary corporation, taxed by the federal government as a separate legal entity.
S Corporation
- subchapter S corporation
- A corporation that offers limited liability to its owners and passes taxable income or losses on to stockholders.
Limited Liability Company
A form of organization in which owners have limited liability but pay personal income taxes on business profits
