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Splash Screen
End of Chapter Focus
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Section 1-3
• How many times have you seen a product for sale and said, “That was my idea”? Or seen an item and thought, “That’s a good idea. I wonder how they thought of that”?
Introduction
• Many new products and services arise from personal experience.
• In this section, you’ll learn how to take your ideas and start a business and the four elements of business operation that entrepreneurs need to consider.
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Section 1-4
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Getting Started
• People who decide to start a business and are willing to take risks are entrepreneurs.
• Collect information about the business, the factors of production for the product, and learn about taxes and laws relating to the business.
• Federal and state government offer help to small businesses.
• The Internet has a great deal of information to help entrepreneurs.
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Section 1-8
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Elements of Business Operation
• Expenses: wages, equipment, utility bills, rent, supplies, and inventory
• Advertising: information about your company and the service/product you are selling
• Record Keeping: track all your expenses and income
• Risk: balancing the risk against the advantages of being self-employed
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Section 2-3
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• Businesses can be organized in a number of ways.
• Some have one owner. While others have multiple owners or partners.
Introduction
• In this section, you’ll learn that the two most common ways of organizing business in the United States are sole proprietorships and partnerships.
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Section 2-4
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Sole Proprietorships
• A business owned by one person, known as the proprietor.
• The biggest advantage is that the owner receives all the profits and has full control of the business.
• The biggest disadvantage is that the owner has unlimited liability, which means the owner is personally responsible for all debts and damages from doing business.
• Personal assets may be seized to pay off business debts.
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Section 2-7
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Partnerships
• A business owned and operated by two or more people.
• Partners sign a legally binding agreement describing the duties of each partner, division of profits and distribution of assets at end of partnership.
• The biggest advantage is that the partners share control and profits.
• The biggest disadvantage is the partners have unlimited liability.
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Section 2-7
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Partnerships (cont.)
• Limited partnerships are businesses in which the partners are not equal.
• The general partner(s) is(are) fully responsible for debts of company.
• Other partners contribute money or property, but have no voice in the company’s management.
• The limited partners have no liability beyond their initial investment.
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Section 2-7
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Partnerships (cont.)
• Joint ventures are temporary partnerships set up for a specific purpose.
• The joint venture is dissolved after it has accomplished its goal.
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Section 3-4
Why Form a Corporation?
• The need for financial capital.
• Wanting financial backers who will lend funds without having a hand in the business.
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Section 3-4
What Is a Corporation
• An organization owned by many people but treated by law as if it were a person.
• Corporations can own property, pay taxes, make contracts, sue and be sued.
• Corporations have a distinct existence from stockholders.
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Section 3-4
What Is a Corporation (cont.)
• A major advantage is stockholders have limited liability, they are not personally responsible, only the business loses money and assets.
• A major disadvantage is corporations pay more taxes than other forms of business organizations.
Figure 3.1a
What Is a Corporation (cont.)
Figure 8.5 Business Organizations
Although proprietorships make up about 73 percent of American businesses, they generate only about 5 percent of total business revenues.
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Section 3-8
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Corporate Structure
• Register the corporation in the state where it will be headquartered.
• File the articles of incorporation which include name, address and purpose of corporation; names, addresses of board of directors; number of shares of stock to be issued; amount of money capital to be raised through stock.
• State grants a corporate charter that allows the corporation to operate in that state.
• Raise capital by selling stocks or bonds.
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Section 3-8
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Corporate Structure (cont.)
• Common stock gives stockholders right to vote and a percentage of future profits.
• Preferred stock doesn’t give voting rights, but guarantees a dividend and these stockholders have first claim on assets left over if corporation goes out of business.
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Section 3-8
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Corporate Structure (cont.)
• Stockholders then elect a board of directors who will supervise and control the corporation by hiring people to run the day-to-day operations of the business.
Figure 8.7 Corporate Chain of Command
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Section 3-17
Franchises
• A contract in which a franchiser sells to another business the right to use its name and sell its product.
• The business buying it, the franchisee, pays a fee that could include a percentage of all money taken in.
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• Franchises often have training programs to teach the franchisee and to set the standards of business operations.
End of Section 3
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