The Business Of Free Enterprise. Enterprise Vs. Entrepreneur Enterprise Business organization...
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Transcript of The Business Of Free Enterprise. Enterprise Vs. Entrepreneur Enterprise Business organization...
The Business Of Free Enterprise
Enterprise Vs. Entrepreneur
• Enterprise• Business organization
• Entrepreneur • Introduce new and better goods and services
or ways of doing things
Characteristics Of Entrepreneurs
• Creative individualistic official thinkers• Start at an early age• Develop and sell ordinary products• Find new ways to sell• Spot new markets and develop new products • Work to perfect their own idea• Work within an existing business
Strategies used by entrepreneurs
• Take advantage of unexpected opportunities• Respond to changing market conditions • Improve a product or process • Provide alternative goods/services• Identify population trends
Economic role of a small business
• Small business• Independently owned and operated and is not
dominate in its field of operation • Industry • Group of one or more firms that produce
identical or similar products• Small businesses are the largest percentage of
our economy
Advantage of small business
• Can add or discontinue merchandise line quickly
• Change hours of operation• Alter pricing• Can profit in small markets• Suited to time-stressed consumers• Appeal to specific demographic groups
Disadvantage of small business
• Higher failure rate than large firms for three reasons:
• Poor management • Inadequate financing • Insufficient capital slow sales heavy debt• Inability to hire highly qualified workers • Problem with salary and benefits
Reasons for owning your own business
• Personal independence • Profits are all yours BUT so are the debts• Opportunity to work hours they choose
Forms of business organization Sole Proprietorship
• Advantages • Easy to start, few regulations and forms• Free to make all decisions• All profits are yours • No separate taxes• Can reach quickly to problems• Personal satisfaction• Disadvantages • Unlimited liability• Limited funds• Lack of opportunities for employees• Competitors and ability of owner can change
Forms of business organizationPartnership
• Advantages• Easy to form no special tax • Partners bring more money to business• New and different ideas• Disadvantage• Unlimited liability • If partner dies or leaves business• Limited funds• Conflicts arise if partner disagrees
Corporations
• Must obtain a state charter • Represented by shares of stock• Stockholders are the owners • Privately held stocks are owned by a small
group or family• Can be sued, can sue, and enter into
contractual agreements
Forms of business organizationCorporation
• Advantage • Shareholders are responsible only for a debt up to their
investment• Ease of transfer of stocks buy or sell)• Stockholder dies corporation doesn’t dissolve • Raise money by selling stocks or issuing bonds• Disadvantages• Complicated and costly• Taxed twice: Tax on profits, stockholders pay taxes on dividends • When selling stocks to the public, must disclose finances and
operations
Special types of business organization
S. Corporations
• Don’t pay corporate income tax• Stockholders pay tax on dividends • May not have more than 35 stockholders and
may not own 80% or more of another corporation
Limited Liability Companies (LLC)
• Must have two or more members who function as a partner or stockholder
• Hold property in name of LLC rather than members names
• Advantage Don’t risk personal assets• Disadvantage state regulations and strict tax
rules limited life
Non-Profit Corporations
• Cover operation expenses including wages and benefits
• Normally serves educational, social, charitable, religious purposes
Government-owned Corporations
• Undertaken when the market doesn’t adequately supply a needed good or service
Cooperatives
• Individuals or companies that perform functions for the members
• Housing are multiple dwelling units owned by the tenants
• Consumer are retail businesses owned by the people who share in the profits and purchase goods/services at lower costs
• Producer Companies that manufacture and market products on behalf of the members
Franchises
• Is a license that entitles its holder to operate his or her individually owned business as if it were part of large chain of stores
Franchises
• Advantage • Company can expand with little cost to itself • Have the incentive to increase efficiency, sales,
profits• Provide training programs, financial
assistance, advertising
How large corporations are organized
• Charter • Stockholders• Board of directors • Annual Corporation report