Introduction to Business & Technology What is a Business? Introduction to Business & Technology

Characteristics of a Business An organization that produces or distributes a good or service Reacts quickly to the changing nature of a society.

3 Major Activities of a Business (whether it has one or one million workers) Production Involves making a product or providing a service Marketing and Sales Deals with how goods and services are exchanged between producers and consumers Finance Includes all money matters related to running a business

2 Major Kinds of Businesses Manufacturing/Industrial Businesses Produce things/tangibles that you can touch. Examples: mining, manufacturing, construction Service/Commercial Businesses Offer services (intangibles) Examples: marketing activities; such as, advertising, sales promotion financing activities; such as, banking and investing companies supplying/furnishing services; such as, transportation, insurance products, electric power, hotels, DVD rentals

Important Characteristics of Businesses Changing Nature of Businesses Businesses must be dynamic and react quickly to the changing nature of society. Efficiency--measured by output and productivity Output: the quantity/amount produced in a given period of time. Productivity: producing the largest quantity in the least amount of time by using efficient methods and technology at the lowest cost.

3 Ways to Improve Productivity Specialization: workers become expert at what they do. As a result, quality improves while increasing the amount produced. Mass Production: the use of up-to-date equipment and assembly line methods to produce large quantities of identical goods. Technology: Includes equipment, manufacturing processes, software, and materials from which products are made. Because of new discoveries and inventions, better-quality goods and services are built at a faster pace and often at a lower cost. Advanced technology, offers a business a powerful advantage over competitors

Business in the U. S. can be organized in the following ways:

1. Sole/Single Proprietorship/Ownership A business owned by one person

Advantages and Disadvantages of organizing as a Sole Proprietorship Advantages to the owner: His/her own boss Receives all profits Personally knows employees and customers Can act quickly in making decisions Free from too much red tape Usually pays less in income tax. Disadvantages to the owner: He/She may lack special skills and abilities. May lack funds. Bears all losses Illness or death may close the business

Tax Considerations when organizing as a sole proprietorship Owners are taxed at individual rates. Owners have unlimited liability for the debts of the business.

A business owned by two or more people but is not incorporated. 2. Partnership A business owned by two or more people but is not incorporated.

Advantages and Disadvantages of organizing as a Partnership Skills and Abilities are pooled Sources of funds/capital increased Credit position improved Less of a tax burden than a corporation Disadvantages: Unlimited financial liability Each partner is bound by the contracts of other partners Disagreement among partners can cause the demise of the business Example: Profit distribution Uncertain life of the business Example: Difficulty withdrawing from the partnership

Tax Considerations for organizing as a partnership Owners are taxed at individual rates. In a general partnership owners have unlimited liability for not only themselves, but also for their partners.

Acts as a legal “person” on behalf of the owners. 3. Corporation A business that operates as a legal “entity/being” separate from any of the owners. Acts as a legal “person” on behalf of the owners.

Corporations Raise money for business activity through the sale of stock to individuals and organizations that wish to be part owners, these part owners are known as (shareholders/stockholders) .

Advantages and Disadvantages of organizing as a Corporation More available sources of funds/capital/cash to operate through the sale of stock. Fixed financial liability of owners. Limited Liability of the stockholders Availability of Specialized Management. Permanency of Existence (Unlimited life of the company. Ease of transfer of ownership Disadvantages: More difficult creation process than other forms of business organization--Restrictions to charter used to incorporate. Taxes are usually higher. Government regulations and reports are more extensive Owners are usually limited in their control Record keeping for stockholders is more complex