1. OVERVIEW OF SMALL BUSINESS
Explain the legal environment of small business.
Compare forms of business ownership.
(The logos used in this PowerPoint were copied directly from corporate websites. They have not been altered in any way.)

2. Bell Ringer List two of the Factors of Production and explain how they
contribute to the economy.
Name two types of economies and give an example of a
country that fits that economy.
3. Name the economy that you think is best and why.

3. Questions to think about
Entrepreneurs
Which of the following statements do you agree/disagree with and why?
A. A business owner should be the only one to make business decisions.
B. A business should consider the needs of their employees when making decisions for the business.
C. A business owner only needs to be concerned with employee pay and no other benefits.
D. Business owners should be only concerned about the business needs.

4. Three basic forms of business ownership
Sole proprietorship
Partnership
Corporation

5. Sole proprietorship A business owned and operated by one person.
Approximately percent of all businesses in the U.S are sole proprietorships.

6. Advantages of sole proprietorships
Easy and inexpensive to create.
Owner makes all business decisions.
Owner receives all profits.
Least regulated form of business ownership.
Business itself pays no taxes.

7. Disadvantages of sole proprietorships
Owner has unlimited liability for all debts and actions of the business. Unlimited liability: The debts of the business may be paid from the personal assets of the owner.
Difficult to raise capital.
Sole proprietorship is limited by his/her skills and abilities.
The death of the owner automatically dissolves the business.

8. Journal Response
1. List at least two advantages and two disadvantages of a sole proprietorship.

9. What is a Partnership?
A form of business ownership in which two or more people share the assets, liabilities, and profits.

10. Types of Partnerships
General partnership: A partnership in which all partners have unlimited personal liability and take full responsibility for the management of the business.
Limited partnership: A partnership in which the partners’ liability is limited to their investment.
Joint venture: A partnership in which two companies join to complete a specific project. The partnership ends after a specified period of time.
Strategic alliance: A partnership in which two businesses work together for mutual benefit.

11. What are the Advantages of partnerships?
Shared decision making and management responsibilities.
Easier to raise capital than in a sole proprietorship.
Few government regulations.
Business losses are shared by all partners.

12. What are the Disadvantages of partnerships?
Partnerships may lead to disagreements.
Some entrepreneurs are not willing to share responsibilities and profits.
Some entrepreneurs fear being held legally liable for the error of their partners.
Each owner has unlimited liability.

13. What is a Corporation?
A business that is chartered by a state and legally operates apart from its owners.

14. How many Types of corporations are there?
C-corporation: The most common form of corporation. It protects the entrepreneur from being personally sued for the actions and debts of the corporation.
Subchapter S corporation: A corporation that is taxed like a sole proprietorship or partnership.
Nonprofit corporation: Legal entities that make money for reasons other than the owner’s profit.
Limited Liability Company (LLC): A new form of business ownership that provides limited liability and tax advantages.

15. What are the Advantages of corporations?
Can raise money by issuing shares of stock.
Offers owners limited liability. Limited liability: Owners are liable only up to the amount of their investments.
People can easily enter or leave the business by buying or selling their shares of stock.
The business can hire experts to professionally manage each aspect of the business.

16. What are the Disadvantages of corporations?
Legal assistance is needed to start a corporation.
Start-up is costly.
Corporations are subject to more government regulations than partnerships or sole proprietorships.
A lot of paperwork is involved in running a corporation.
Income is taxed twice.

17. Can you name some Alternate approaches to starting a business?
Buy an existing business.
Enter a family business.
Own a franchise business.

18. What are the Advantages of buying an existing business?
Existing businesses already have customers, suppliers, and procedures.
Seller of the business may be willing to train the new owner.
There are existing financial records.
Financial arrangements may be easier.

19. What are some of the Disadvantages of buying an existing business?
Business may be for sale because it is not making a profit.
Problems may be inherited with the purchase of an existing business.
Many entrepreneurs may not have the capital needed to purchase an existing business.

20. What are the Advantages to entering a family business?
There is a certain sense of pride and accomplishment that comes from being part of a family endeavor.
A business can remain in the family for generations.
Some people enjoy working with relatives.
The efforts of running a family business give one the benefit of knowing that their efforts are helping those whom they care about.

21. Are there Disadvantages to entering a family business?
Senior management positions are often held by family members who may not be the best qualified.
It may be difficult to retain qualified employees who are not members of the family.
Family politics may affect decisions regarding the business.
It is often difficult to separate business life and private life in family-run businesses.
It is often difficult to set policies and procedures and to make decisions.

22. How does a franchise Business work?
Franchise: A legal agreement that gives an individual the right to market a company’s products or services in a particular area.
Franchisee: A person who purchases a franchise agreement.
Franchisor: The person or company who sells a franchise.
Initial franchise fee: The fee the franchise owner pays in return for the right to run the business.

23. What are some of the Advantages of purchasing a franchise business?
An established product or service is being provided.
Franchisors often offer management, technical, and other assistance.
Equipment and supplies may be less expensive.
A guarantee of consistency attracts customers.

24. What are the Disadvantages of purchasing a franchise business?
The cost of franchises may be high, which can reduce profits.
Franchise owners are limited in the decisions they can make regarding the business.
The performance of other franchises impact on the franchisee.
The franchise agreement may be terminated by the franchisor.