taxation
structure |
tax |
Sole proprietorship |
individual income tax |
partnership |
individual owner's income tax |
corporatoin |
corporatoin & shareholder tax |
s corporatoin |
see partnership |
LLC |
see partnership |
c-corps |
double tax |
Advantages & Disadvantages
Sole Proprietorships |
Advantages |
Disadvantages |
• Ease and cost of formation
• Allow a high level of secrecy
• Owner keeps all profits
• Flexibility and control of the business
• Government regulation is minimal
• Taxes paid only once |
• Unlimited liability
• Scarce external funding
• Owners need diverse skills
• Success is tied to the owner
• Lack of qualified employees
• Higher taxation |
| |
Partnerships |
Advantages |
Disadvantages |
• Easy to organize
• Availability of capital & credit
• Combined knowledge and skills
• Swift decision making
• Government regulations are few
|
• Unlimited liability
• Responsible for each others’ decisions
• A new agreement is needed if the partnership changes
• Difficult to sell a partnership interest
• Distribution of profits may be uneven
• Cannot find external funding as easily as large corporations |
| |
Corporations |
Advantages |
Disadvantages |
• Limited liability
• Ease of transfer of ownership
• Perpetual life
• Securing funding is easier than for other forms of business
• Expansion potential |
• Double taxation
• Expensive to form
• Disclosure of information to the government and the public
• Owners and managers are not always the same and can have different goals |
Small Business
Small Business |
Any independently owned and operated business that is not dominant in its competitive area |
Small Business Administration (SBA) |
An independent agency of the federal government that offers managerial and financial assistance to small businesses |
Especially attractive
industries to entrepreneurs: |
Retailing
and wholesaling |
Selling directly to consumers(Restaurants, Dry cleaners, Drugstores) |
Services |
Attracts individuals whose skills are not required by large firms |
Manufactur-
ing |
Small manufacturers excel at customization |
High
technology |
Businesses that depend heavily on advanced scientific and engineering knowledge |
Small businesses may obtain funding from their suppliers in the form of a trade credit |
Suppliers allow the business to take possession of the needed goods and services and pay for them at a later date or in installments |
Organizations and programs exist to help small
businesses: |
o Small Business Administration (SBA)
o Small Business Development Centers (SBDCs)
o Service Corps of Retired Executives (SCOREs)
o Active Corps of Executives (ACEs)
o Small Business Institutions (SBIs)
o U.S. and Local Departments of Commerce
o Other small businesses |
Employs less than 500 people
corporations
Corporation |
A legal entity, created by the state, whose assets and liabilities are separate from its owners
can own and transfer property, enter into contracts, sue and be sued in court |
Other Types of Business Ownership |
S-Corporation |
Corporation taxed as though it were a partnership with restrictions on shareholders, Very popular with entrepreneurs, representing nearly half of all corporate filings |
Joint Venture |
A partnership established for a specific project or for a limited time, Control can be divided equally, or one partner may control decision making |
Limited Liability Company (LLC) |
Considered a blend of the best characteristics of corporations, partnerships and sole proprietorships |
Cooperatives or Co-ops |
Organizations composed of individuals or small businesses that have banded together to reap the benefits of belonging to a larger organization |
Private Corporation |
a few people who are closely involved in managing the business
None of their stock is sold to the public |
Initial Public Offering (IPO) |
Selling a corporation’s stock on public markets for the first time |
Board of Directors |
A group of individuals, elected by the stockholders to oversee the general operation of the corporation, who set the corporation’s long-range objectives |
Creating a Corporation |
Incorporators create the corporation
Following state procedure of chartering the corporation
Incorporators file legal articles of incorporation with the state
State issues a legal corporate charter to the company
Owners establish bylaws and board of directors
|
Corporations are typically owned by many individuals and organizations who own shares of the business
partnerships
Partnerships |
A form of business organization defined by the Uniform Partnership Act as “an association of two or more persons who carry on as co-owners of a business for profit” |
sub types: |
Limited Partnership |
Has at least one general partner, who assumes unlimited liability, and at least one limited partner whose liability is limited to his or her investment in the business |
General Partnership |
Involves a complete sharing in both the management and the liability of the business |
Articles of Partnership |
Legal documents that set forth the basic agreement between partners |
|
|
Define
Products |
Good and services with tangible and intangible parts, that provied satisfaction and benafits |
Stakeholders |
a group that has a stake in the outcome of the business |
Inflation |
a general increase in prices and fall in the purchasing value of money. |
Economics |
the study of how resorse are distibuted |
Supply and demand |
the amout of stuff and want |
Equilibrium price |
were the Equilibrium price mach of the graph |
Business plan |
a document setting out a business's future objectives and strategies for achieving them.(in detale) |
Distinguish among:
Sole proprietorship |
Businesses owned and operated by one individual.
The most common form of business organization in the United States
(Typically employ fewer than 50 people) |
Limited partnership |
Has at least one general partner, who assumes unlimited liability.
At least one limited partner whose liability is limited to his or her investment in the business |
Distinguish among:
Domestic corporations |
If conducting business in the state in which it is chartered |
Foreign Corporation |
If conducting business outside the state in which it is chartered |
Alien corporations |
If conducting business outside the nation in which it is incorporated |
Distinguish among:
Franchise |
A license to sell another’s products or to use another’s name in business, or both |
Franchisee |
The company that sells a franchise |
Franchiser |
The purchaser of a franchise |
Distinguish among:
business |
Individuals and originations trying to earn a profit by providing products and satisfy peoples need and want |
non-profits |
Individuals and originations that provides a good or serves that does not share in the purpose of earning money |
Stocks
Preferred Stock |
A special type of stock whose owners, though [do] not generally having a say in running the company, have a claim to profits before other stockholders do |
Common Stock |
Stock whose owners have voting rights in the corporation, yet do not receive preferential treatment regarding dividends
May vote by proxy, which allows stockholders to assign their voting privilege to someone else. |
resources
Natural Resources |
Land, forests, mineral, water, and other things not made by people |
Human Resources – also called Labor |
The physical and mental abilities people use to produce goods and services |
Financial Resources – also called Capital |
The funds used to acquire the natural and human resources needed to provide products |
Intangible Resources |
Such as a good reputation for quality products or being socially responsible |
Economic systems
Socialism |
An economic system in which the government owns and operates basic industries but individuals own most businesses
(may allow a higher standard of living and is more stable; but taxes and unemployment are generally higher) |
Capitalism - or Free Enterprise |
which individuals own and operate the majority of businesses that provide goods and services
|
| |
Pure capitalism
laissez-faire capitalism
free-market:
all economic decisions are made without government |
| |
Modified capitalism:
differs from pure capitalism as the government intervenes and regulates business to some extent |
|
|
quize1
A new small retailer needs all the following except |
manufacturing facilities. |
One of the attractive features of franchising is that |
franchisers have well-known names and products. |
The SBA considers businesses with up to ____ employees to be small businesses. |
500 |
The __ is an independent agency of the federal government that offers managerial and financial assistance to entrepreneurs. |
Small Business Administration |
Initially, the factor that probably affects a company's reputation more than anything else is poorly managed |
growth. |
Which of the following industries requires greater capital and has higher initial start-up costs for a small business? |
High technology |
An owner who uses personal assets to start a business is employing ____ financing. |
equity |
Approximately ___ of new employer businesses fail within the first five years. |
half |
Franchising involves providing a(n) ____ to sell another's products, use another's name, or both. |
license |
Few businesses make money |
from the start. |
Limited partners do not participate in the ____ of the business. |
management |
A(n) ____ is subject to double taxation. |
C corporation |
A(n) ___ occurs when two companies combine to form a new company, and a(n) ___ occurs when one company purchases another. |
merger; acquisition |
Which of the following is the easiest to dissolve? |
Sole proprietorship |
Which of the following is an advantage of the corporate form of organization? |
Smooth transfer of ownership |
Question 16 In a limited partnership, at least one partner has ________ liability. |
unlimited |
Liability is ____ in a sole proprietorship. |
unlimited |
The number of votes common stockholders are normally entitled to have for each share of stock is |
one. |
____ can enter into contracts with other legal entities. |
Corporations |
All of the following would likely be found in a company's articles of incorporation except |
expected profitability of the corporation. |
quize2
The early economy of the United States was marked by colonists who operated a society based primarily on |
agriculture. |
All of the following are associated with the manufacturing and marketing economies except |
farming. |
When there is only one business providing a product in a given market, there exists |
a monopoly. |
According to the text, profit is the reward for business in exchange for the ____ taken in providing products. |
risks |
Factors of production are |
resources used to produce goods and services. |
What is the primary lesson to be learned from the economic scandals of the early 21st century? |
Ethical conduct and corporate social responsibility are very important. |
The goal of business is to earn |
profits. |
All the following are factors of production used to make goods and services except |
customers. |
Financial resources are also known as _______________. |
capital |
Economic contraction occurs when |
spending declines. |
A continuing rise in prices over a period of time refers to |
inflation. |
When a business fails or does not make a profit, _______ have the most to lose. |
owners |
_________________ is the study of how resources are distributed for the production of goods and services within a social system. |
Economics |
________________ can be harmful if individuals' incomes do not increase at the same pace as rising prices because it reduces their buying power. |
Inflation |
If a business is to be successful in the long run, it must produce quality products, operate efficiently, and be |
socially responsible. |
The sum of all goods and services produced in a country during a year in relation to population is called |
gross domestic product per capita. |
Most economic systems |
exist in a mixed form. |
Communist societies |
appear to be efficient and equitable, at least in theory. |
Socialism |
has government ownership of basic industries. |
Which of the following questions is not addressed by all economic systems? |
How should the goods and services be marketed? |
quize2 cap
The early economy of the United States was marked by colonists who operated a society based primarily on agriculture. |
Farming is not associated with the manufacturing and marketing economies. |
When there is only one business providing a product in a given market, there exists a monopoly. |
Profit is the reward for business in exchange for the risks taken in providing products. |
Factors of production are resources used to produce goods and services. |
Ethical conduct and corporate social responsibility are the primary lessons to be learned from the economic scandals of the early 21st century |
The goal of business is to earn profits. |
Customers is not a factors of production used to make goods and services. |
economic contraction occurs when spending declines. |
A continuing rise in prices over a period of time refers to inflation |
When a business fails or does not make a profit, the owners have the most to lose. |
Economics is the study of how resources are distributed for the production of goods and services within a social system. |
Inflation can be harmful if individuals' incomes do not increase at the same pace as rising prices because it reduces their buying power. |
If a business is to be successful in the long run, it must produce quality products, operate efficiently, and be socially responsible. |
The sum of all goods and services produced in a country during a year in relation to population is called gross domestic product per capita. GDP |
Most economic systems exist in a mixed form. |
Communist societies appear to be efficient and equitable, at least in theory. |
Socialism has government ownership of basic industries. |
How should the goods and services be marketed is not addressed by all economic systems. |
quize1 cap
- |
One of the attractive features of franchisers is thier well-known names and products. |
The SBA considers businesses with up to 500 employees to be small businesses. |
The Small Business Administration is an independent agency of the federal government that offers managerial and financial assistance to entrepreneurs. |
Initially, the factor that probably affects a company's reputation more than anything else is poorly managed growth. |
The High technology industries requires greater capital and has higher initial start-up costs for a small business? |
An owner who uses personal assets to start a business is employing equity financing. |
Approximately half of new employer businesses fail within the first five years. |
Franchising involves providing a license to sell another's products, use another's name, or both. |
Few businesses make money from the start. |
Limited partners do not participate in the management of the business. |
A C corporation is subject to double taxation. |
An merger occurs when two companies combine to form a new company, and an acquisition occurs when one company purchases another. |
Sole proprietorship is the easiest to dissolve |
Smooth transfer of ownership is an advantage of the corporate form of organization |
In a limited partnership, at least one partner has unlimited liability. |
Liability is unlimited in a sole proprietorship. |
The number of votes common stockholders are normally entitled to is one per stock |
Corporations can enter into contracts with other legal entities. |
Expected profitability of the corporation would likely not be found in a company's articles of incorporation |
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