1. Businesses
Ch8

2. Entrepreneurs Primary mover in market economy Comes up with idea
Turns idea into marketable product
Accepts risk of success or failure
Claims profit or loss

3. Creative Changes 1. Introduce new product (Facebook)
2. Improve Quality of Existing Product (Starbucks)
3. Introduce new production method (Ford)
4. Introduce new ways of doing business (Dell)

4. Financing Financial capital- money needed to start or expand business
Loan
Venture capitalists
Own savings
Profits attract competitors

5. Determining Entrepreneur
Invention, Innovation
Must accepts risk (self employed)
Must have power to fire and hire
Figure out what and how to produce

6. Sole Proprietorship Owned and run by a single individual
Earns profits and is responsible for losses
Can hire employees, most don’t
Self employed- plumber, farmer, lawyers
Some do it part time
¾ of all US businesses
2/3 report annual revenues less than $25,000

7. Advantages of Sole Proprietorships
Easy to start
Few Government Regulations
Complete Control
Owner keeps all profits
Lower taxes
Pride of ownership

8. Disadvantages of sole proprietorship
Unlimited personal liability
Difficulty raising financial capital
Limited life
Difficulty finding and keeping good workers
Broad responsibilities

9. Partnerships
2 or more individuals who agree to contribute resources to the business in return for a shore in profit or loss
General Partnership- both responsible and share liability (doctors, lawyers, accountants)
Limited Partnership-one partner is strictly financial in contribution, only lose investment

10. Advantages of Partnership
Easy to Start
Few Government Regulations
Shared Decision marking and increases specialization
Greater ability to raise financial capital
More able to attract and retain workers
Lower taxes

11. Disadvantages of partnerships
Unlimited Personal liability
Limited life of Business
Partners may disagree
Profits must be shared

12. Incorporating
Corporation- legal entity with existence distinct from people who organize it, own it, run it
Account for 18.3% of all businesses and 82.3% of all sales
Articles of incorporation- written application to a state seeking permission to form corporation
Board of directors, elected by stockholders
Owners issued stock
Dividends- profits a corporation pays to its stockholders

13. Types of corporations
Private corporation- issues stock to a few people
Publicly traded corporation- many stockholders bought and sold in stock exchanges

14. Advantages of incorporation
Easier to raise financial capital
Limited liability
Unlimited life
Specialized management

15. Disadvantages of incorporation
Difficult and costly to start
More regulated
Owners have less control
Double taxation

16. Hybrid businesses S corporation Limited liability company
Limited liability partnership
Cooperative
Not-for-profit organization