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Small Business Management
Quiz 1
62
Business
Undergraduate 2
02/05/2013

Additional Business Flashcards

 


 

Cards

Term
small manufacturers contain fewer than how many employees?
Definition
500
Term
small wholesalers contain fewer than how many employees?
Definition
100
Term
small retailers have fewer than how much money in annual revenues?
Definition
6 million
Term
small enterprises contain how many people?
Definition
1 to 50
Term
medium enterprises contain how many people?
Definition
51 to 500
Term
businesses with less than 20 employees?
Definition
very small
Term
businesses with 20-99 people
Definition
small
Term
businesses with 100-499 employees
Definition
medium
Term
businesses with 500 or more people
Definition
large
Term
percentage of small businesses in the US today
Definition
99.7%
Term
Qualitative factors in describing small businesses
Definition

1. management is independent, because he or she owns the business

2. capital is supplied and ownership is held by one or few individuals

3. the area of operation is primarily local, although the market is not necessarily local

4. the business is small in comparison with large competitors.

Term
contributions of small business
Definition

1. new jobs - 52% of nation's private sector workforce.  45% total private payroll. service - largest number of people.

2. innovations - 75% service, 65% product and process innovations. 13-14 times the numbe of patents per employee than big business.

3. new opportunities - 6 million businesses and 600,000 corporations every year.  10 percent of  people 19-64 entreprenuers

Term
USA been moving from industrial economy to...
Definition
knowledge-based economy
Term
benefits of owning a small business
Definition

1. opportunity to gain control over your own destiny.

2. opportunity to make a difference.

3. opportunity to reach your full potential.

4. opportunity to reap important profits.

5. opportunity to contribute to society and be recognized for your efforts

6. opportuity to do what you enjoy doing.

Term
potential drawbacks of entreprenuership
Definition

uncertainty of income

risk of losing your entire invested capital

long hours and hard work

lower qulity of business life until the business gets established.

high levels of stress

complete responsibility

Term
know your business in depth...
Definition

get the best education in your business area

read everything you can

develop personal contacts with suppliers, customers, and trade associations.

Term
know your market
Definition
learn what customers have in common so as to serve them better and remain competitive
Term
prepare a business plan
Definition
crucial to success
Term
manage financial resources
Definition
most valuable resource is cash
Term
understand financial statements
Definition
to truly know what's going on in your business
Term
learn to manage people effectively, find/keep effective employees
Definition
employees are your most valuable asset
Term
set your business apart from the competition
Definition
convince customers that your product is superior
Term
how long do businesses last
Definition

1. less than 10 percent of businesses cease operations in less than 1 year

2. 25 percent will fail in first 2 years

3. 45 percent will fail between 3-5 years

4. only 13 percent of businesses will last more than 21 years

Term
most common causes of business failure
Definition

inadequate management

inadequate financing

Term
legal structures of business
Definition
sole proprietorships, partnerships, corporations, limited liability companies, cooperatives
Term
most common form of ownership?
Definition
sole proprietorships - 72 percent
Term

percent of businesses that are corporations

 

Definition
20 percent
Term
percent of businesses that are partnerships
Definition
9 percent
Term
relevant issues to entrpreneurs
Definition
tax considerations, liability exposure, start-up and future capital requirements, control, managerial ability, business goals, management succession plans, cost of formation
Term
sole proprietorship
Definition
most popular and simplest to form. owned and managed by one individual
Term
advantages of a sole proprietorship
Definition
simple to create, least costly to establish, profit incentive, total decision making authority - respond quickly to changes, no special legal restrictions, easy to get in, easy to get out
Term
disadvantages of a sole proprietorship
Definition
unlimited personal liability, limited access to capital, limited skills and abilities (many fail because of poor managerial skills), feelings of isolation, lack of continuity for the business
Term
partnership
Definition
association fo two or more people who co-own a business
Term
general partnerships
Definition
business structure in which the business owners share the management and risk of the operation (most common)
Term
limited partnerships
Definition
business structure in which 1 or more of the owners may be granted limited liability.  at least one partner must be a general partner
Term
articles of partnership
Definition
law does not require, but it is wise to work with an attorney to develop an agreement 
Term
partnership agreement
Definition
document that states all of the terms of operating the partnership for the protection of each partner involved.
Term
without a written agreement...
Definition
 a partnership operates according to the rules of the state under Revised Uniform Partnership Act RUPA. settle problems between partners
Term
advantages of a partnership
Definition
easty to establish, complementary skills, division of profits, access to additional capital, tax advantage (owners pay) and no double taxation, minimal regulation, flexibility (more partners = less flexibility), taxation
Term
general partners
Definition
those who take an active role in managing a company and who share in its rewards, liabilities, and responsibilities.
Term
limited partners
Definition
financial investors who do not want to participate in the day to day affairs of the partnership and seek to limit their risk.  they cannot take an active role in operation of the company and have limited personal liability for the company's debts and obligations.  cannot work more than 500 hours a year.
Term
silent partner
Definition
not active in the business but generally are known to be members of the partnership
Term
dormant partners
Definition
neither active nor generally known to be associated with the business
Term
disadvantages of a partnership
Definition
unlimited liability of at least one parter - you can be held liable for the negligence of your partners, capital access, difficulty in disposal of partnership interest without dissolving the entire partnership, lack of continuity
Term
right of first refusal
Definition
requries the selling partner to give the remaining partners the first chance to buy the exiting partners' shares, potential for personality and authority conflicts, taxation
Term
partners are bound by the law of the agency
Definition
each partner acts as an agent for the business and can legally bind the other partner to a business agreement. this agency power requries all partners to exercise good faith and reasoable care in performing their responsibilities.
Term
limited partnership
Definition
modification of a general partnership, and is composed of at least one general partner and at least one limited partner.
Term
primary disadvantage of a limited partnership
Definition
complexity and cost of establishing this business entity
Term
Master Limited Partnership MLP
Definition
similar to regular limited partnerships except their shares are traded on stock exchanges like a corporation. one main advantage is limited liability, profits are divided among the owners, potentially comprised of thousands of partners.
Term

limited liability partnerships LLP

 

Definition
all partners in the business are limited partners, only limited liability. do not pay taxes. professionals (attorneys, doctors, dentists, accountants)
Term
corporation
Definition
most complex form of ownership.  autonomous entity that has legal rights of a person that is separate from its owners.  ability to sue and be sued, to own property, and engage in transactions
Term
domestic corporation
Definition
conducts business in the state which it is incorporated
Term
foreign corporation
Definition
formed in one state but conducts business in another state
Term
alien corporation
Definition
a corporation that is formed in other countries and conduct business in the USA
Term
closely held corporations
Definition
have shares that are controlled by a relatively small number of people
Term
publicly held corporations
Definition

have a large number of shareholders, and their stock is usually traded on one of the large stock exchanges

 

Term
advantages of the corporation
Definition

limited liability of stockholders

ability to attract capital - most effective ownership for accumulating large amounts of capital.

bankers and other lenders regard corporations as being mroe stable than SP and parnterships. corporation can sell its stock to private investors or public

transferable ownership - can sell shares to someone else. closely held corporation - much more difficult

Term
disadvantages of the corporation
Definition

cost and time

double taxation - tax at corporate level and at individual level

potential for diminshed marginal incentives - employee stock ownership plan ESOP - a plan in which managers and employees become owners in the company

legal requirements and regulatory red tape

potential loss of control by the founders

Term

forming a corporation

 

Definition

1. prepare articles of incorporation and file them with secretary of state where youare incorporating

2. choose board of directors

3. adobt bylaws

4. elect officers

5. issue stock

Term
s corporation
Definition
provides you with the limited liability protection of a corporation while allowing the tax advantages of a partnership - avoids double taxation and no more than 100 shareholders
Term
limited liability company
Definition
offers limited liability protection of corporation and the tax advantages of a partnership without the restrictions of an s corporation. partners not liable for debts or obligations charged to the partnership from negligence from other partner.  in order to qualify the firm must carry a high level of liability insurance or other financial security
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