Small Business Administration (SBA)
government agency charged with assisting small businesses
Small Business
independently owned business that has relatively little influence in its market
Importance to US Economy:
1. Job Creation
2. Innovation
3. Contributes to Big Business
Entrepreneur
businessperson who accepts both the risks and the opportunities involved in creating and operating a new business venture
Entrepreneurship
the process of seeking businesses opportunities under conditions of risk
Characteristics
1. Resourceful
2. Concerned with Good Customer Relations
3. Desire to be own Box
4. Ability to deal with risk
Business Plan
document in which the entrepreneur summarizes her or his business strategy for the proposed new venture and how that strategy will be implemented
Stages:
1. Set reasonable Goals & Objectives
(a) Strategies that will be used & Implemented
2. Forecast Sales
Franchise
arrangement in which a buyer (franchisee) purchases the right to sell the good or service of the seller (franchiser)
Advantages
1. Proven business opportunity
2. Access to management expertise
Disadvantages
1. Start-Up Costs
2. Ongoing Payments
3. Managem
Small Business Development Center (SBDC)
SBA program designed to consolidate information from various disciplines and make it available to small businesses
Sole Proprietorship
business owned and usually operated by one person who is responsible for all of its debts
Advantages
1. Freedom
2. Simple to Form
3. Low start-up costs
4. Tax Benefits
Disadvantages
1. Unlimited Liability
2. Limited Resources
3. Limited Fundraising Capabi
Unlimited Liability
legal principle holding owners responsible for paying off all debts of a business
General Partnership
business with two or more owners who share in both the operation of the firm and the financial responsibility for its debts
Limited Partnership
type of partnership consisting of limited partners and a general (or managing) partner
Advantages
1. More Talent & Money
2. More Fundraising Capability
3. Relatively Easy to Form
4. Limited Liability for Limited Partners
5. Tax Benefits
Disadvantages
1. U
Limited Partner
partner who does not share in a firm's management and is liable for its debts only to the limits of said partner's investment
General (or Active) Partner
partner who actively manages a firm and who has unlimited liability for its debts
Master Limited Partnership
Master partner has majority ownership and runs the business.
Minority partners have no voice in management.
form of ownership that sells shares to investors who receive profits and that pays taxes on income from profits
Cooperative
form of ownership in which a group of sole proprietorships and/or partnerships agree to work together for common benefits
Corporation
business that is legally considered an entity separate from its owners and is liable for its own debts; owners' liability extends to the limits of their investments
Advantages
1. Limited Liability
2. Continuity
3. Stronger Fundraising Capability
Disadvant
Limited Liability
legal principle holding investors liable for a firm's debts only to the limits of their personal investments in it
Tender Offer
offer to buy shares made by a prospective buyer directly to a target corporation's shareholders, who then make individual decisions about whether to sell
Double Taxation
situation in which taxes may be payable both by a corporation on its profits and by shareholders on dividend incomes
Closely Held (or Private) Corporation
corporation whose stock is held by only a few people and is not available for sale to the general public
S Corporation
hybrid of a closely held corporation and a partnership, organized and operated like a corporation but treated as a partnership for tax purposes
Limited Liability Corporation (LLC)
hybrid of a publicly held corporation and a partnership in which owners are taxed as partners but enjoy the benefits of limited liability
Professional Corporation
form of ownership allowing professionals to take advantage of corporate benefits while granting them limited business liability and unlimited professional liability
Multinational (or Transnational) Corporation
form of corporation spanning national boundaries
Corporate Governance
roles of shareholders, directors, and other managers in corporate decision making and accountability
Stockholder (or Shareholder)
owner of shares of stock in a corporation
Board of Directors
governing body of a corporation that reports to its shareholders and delegates power to run its day-to-day operations while remaining responsible for sustaining its assets
Officers
top management team of a corporation
Chief Executive Officer (CEO)
top manager who is responsible for the overall performance of a corporation
Strategic Alliance
strategy in which two or more organizations collaborate on a project for mutual gain
Joint Venture
strategic alliance in which the collaboration involves joint ownership of the new venture
Employee Stock Ownership Plan (ESOP)
arrangement in which a corporation holds its own stock in trust for its employees, who gradually receive ownership of the stock and control its voting rights
Institutional Investor
large investor, such as a mutual fund or a pension fund, that purchases large blocks of corporate stock
Merger
the union of two corporations to form a new corporation
Acquisition
the purchase of one company by another
Divestiture
strategy whereby a firm sells one or more of its business units
Spin-Off
strategy of setting up one or more corporate units as new, independent corporations
Starting a Small Business
1. Buying an Existing Business
2. Franchising
3. Starting from Scratch
Scratch Business
Questions you must answer
1. Who and Where are my customers?
2. How much profit can be made by selling my product?
3. Who are my competitors?
4. Why will customers buy my product rather than the product of my competitors?
Financing a Small Business
1. Personal Resources
2. Loans from family and friends
3. Bank Loans
4. Venture Capitalists (VC)
5. Small Business Investment Companies (SBICs)
6. Minority Enterprise Small-Business Investment Companies (MESBICs)
7. SBA Financial Programs
Venture Capital Money
Group of investors who invest in companies with rapid growth potential
Small Business Investment Company (SBIC)
Government regulated investment company that borrows money from the SBA to invest in or lend to a small business
Emergence of E-Commerce
The internet provides fundamentally new ways of doing business
Reasons for Failure
1. Managerial incompetence
2. Neglect
3. Weak Control Systems
4. Insufficient Capital
Reasons for Success
1. Hard work, dedication and Drive
2. Demand for product or service
3. Managerial Competence
4. Sheer Dumb Luck
Types of Corporations
1. Closely Held
2. Publicly Held
3. Subchapter S
4. Limited Liability
5. Professional
6. Multinational
Special Issues in Corporate Ownership
1. Joint Ventures and Strategic Alliances
2. Employee Stock Ownership Plans
3. Institutional Ownership
4. Mergers, Acquisitions, Divestitures, and Spin-Offs