1. Chapter 8 Business Organizations Starting A Business
Businesses begin with an idea.
Entrepreneur – person who organizes, manages, and assumes the risks of a business in order to gain profits
People start a business to:
Gain profits
Do something on their own
Be their own boss

2. Starting A Business
Must gather factors of production to start a new business.
Need to be aware of laws, regulations and tax codes.
SBDC – Small Business Development Center
Startup – a beginning business enterprise
Small Business Administration – can help with information and financing

3. Starting A Business
State departments of commerce and community affairs can help a startup.
Small Business Incubator – government-funded agency that assists new businesses by providing advice or low-rent buildings and supplies (Pottsville)
May use the internet to gather information.

4. Starting A Business Elements of Business Operation Expenses
equipment wages insurance
taxes electricity telephone rent/mortgage water sewage
advertising donations inventory
accounting postage supplies
banking internet security
travel cont. ed. employee gifts
dues zoning engineering
inspections contractors building permits
legal fees software memberships
scholarships landscaping PACs
neighbors entertainment product

5. Starting A Business Elements of Business Operation
Inventory – extra supply of the items used in a business, such as raw materials or goods for sale
Receipts – income received from the sale of goods and/or services; also slips of paper documenting a purchase
Risk – can lose $ - 90% of small businesses fail
Value of your time is opportunity cost

6. Sole Proprietorships
Sole Proprietorship – business owned and operated by one person
Proprietor – owner of a business
Unlimited Liability – requirement that an owner is personally and fully responsible for all losses and debts of a business
Assets – all items to which a business or household holds legal claim

7. Sole Proprietorships Advantages Disadvantages Receive all profits
Few regulations and quicker decisions
Lower taxes (usually)
Own boss
Obtaining credit easier
Disadvantages
Losses not shared with others
Unlimited liability – can lose personal assets
Must handle all decision making
Time-consuming
Must rely on own money
Borrowing large sums may be difficult
Death, injury, illness, or not working can mean business will fail

8. Partnerships
Partnership – business that two or more individuals own and operate
Limited Partnership – special form of partnership in which one or more partners have limited liability but no voice in management
Joint Ventures – partnerships set up for a specific purpose just for a short period of time

9. Partnerships Advantages Disadvantages Losses are shared
More efficient with fewer regulations
Taxes lower
Pride in owning own company
Combine $ allowing for more funds & easier ability to loan
Disadvantages
Share profits
Unlimited liability
Disagreements and slower decision making
Borrowing larger amounts limited
Partner death or leaving means business must be reorganized or ended

10. Corporations
Corporation – type of business organization owned by many people but treated by law as though it were a person; it can own property, pay taxes, make contracts and so on
Stock – share of ownership in a corporation that entitles the buyer to a certain part of the future profits and assets of the corporation
20% of businesses but 90% of revenue (pg. 221)
Limited liability – requirement in which an owner’s responsibility for a company’s debts is limited to the size of the owner’s investment in the firm

11. Corporations Corporate structure Registration Selling Stock
Articles of Incorporation – document listing basic information about a corporation that is filed with the state where the corporation will be headquartered
Corporate Charter – license to operate granted to a corporation by the state where it is established
Selling Stock
Common Stock – shares of company with voting rights
Preferred Stock – shares of company with no voting rights but a guaranteed dividend
Dividend – portion of a corporation’s profits paid to its stockholders
Naming Board of Directors – supervises and controls the corporation by hiring officers for the company

12. Franchises
Franchise – contract in which one business (the franchiser) sells to another business (the franchisee) the right to use the franchiser’s name and sell its products
Many hotels, motels, gas stations and fast-food chains are franchised
Franchisee pays a fee and a portion of the profits to the franchiser
Some examples – McDonald’s, Subway, Econo Lodge, Curves, Dunkin Donuts, KFC, & Pizza Hut