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Introduction to Business Lecture 2

Introduction to Business Lecture 2. Forms of business ownership. Critical factors for start-up businesses Capital requirements Risk Control Managerial abilities Time requirements Tax liability. Sole Proprietorships.

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Introduction to Business Lecture 2

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  1. Introduction to BusinessLecture 2 www.AssignmentPoint.com

  2. Forms of business ownership • Critical factors for start-up businesses • Capital requirements • Risk • Control • Managerial abilities • Time requirements • Tax liability www.AssignmentPoint.com

  3. Sole Proprietorships • Sole proprietorship is a business that is owned and managed by one single individual. • The oldest and most acceptable form of private business ownership in the whole world. • This type of business might need some employees or helping hands. www.AssignmentPoint.com

  4. Sole Proprietorships • Advantages of sole proprietorships • Easy to start • Adequate control & freedom • Sole participation in profits & losses • Use of own abilities • Tax rebate/ breaks • Secrecy of product formulas, strategies & documents • Easy to dissolve when situation arises www.AssignmentPoint.com

  5. Sole Proprietorships • Disadvantages of sole proprietorships • Unlimited liability • Difficulty in raising capital • Limitations in managerial ability & techniques • Lack of stability • Demands on time (minimal work life balance) • Hiring and retaining employees is difficult www.AssignmentPoint.com

  6. Partnerships • Partnership is type of business that has two or more partners who carries out the business operations and shares the profits & losses. • Partnerships can be formed based in form of written contract or legal agreements. • General, Limited and Joint venture partnerships. www.AssignmentPoint.com

  7. Corporations • Corporation is a business that is a legal entity separate from its owners. • A corporation hires professional managers, advisors, technicians, skilled and unskilled labors to operate. • A corporation has a legal rights of an individual: can own property, purchase goods & services, donate others or sue others. www.AssignmentPoint.com

  8. Corporations • Types of corporations • Private: Sole objective is to earn profit. • Public: Owned and run by the government. • Closed: Stock owned by few owners. • Open: Owned by many & sold actively. • Municipal: Cities & townships that manages business and they also does business. • Domestic: Incorporated only in any specific state or region. • Foreign: Incorporated in one country and operates in other country. • Non-profit: Service organization incorporated for limited-liability status. • Single individual: Individually owned business incorporated to escape high income tax rate. www.AssignmentPoint.com

  9. Corporations • Advantages of corporations • Limited liability • Skilled management team • Transfer of ownership • Numerous capital structure • Stability • Systematic & organized way of operations • Legal entity status www.AssignmentPoint.com

  10. Corporations • Disadvantages of corporations • Difficulty & expense in formation • Lack of shareholder control • Multiple taxation • Government interference & involvement • Lack of secrecy • Lack of personal interest • Credit limitations www.AssignmentPoint.com

  11. Mergers • When two or more corporations combine into a single entity for strategically capturing market or for gaining more profits, we call them mergers. eg. Sony Erricsson, HP Compaq, Daimler Chrysler, etc • Why do companies merge? • To gain a favorable situation in the market and to reduce competition from the market. www.AssignmentPoint.com

  12. Mergers • Types of mergers • Horizontal merger: Competitive firms in the same market merge together. Example. HP Compaq • Vertical merger: When a firm merges with its supplier. Example. BenQ Seimens • Conglomerate merger: A merging that involves firms which sells goods in two different markets. Example. Transcom Pepsi www.AssignmentPoint.com

  13. Other forms of business • Cooperative organizations • The concept of co-op was first founded by Benjamin Franklin in 1752. • When many small producers band collectively together as one single entity to become more competitive, we call it a cooperative organization. Example. Milk Vita • Cooperative concepts are still popular worldwide especially in agriculture, dairy, fresh food, and retail industries. • Members gets dividends according to their share of products brought to the association. www.AssignmentPoint.com

  14. Other forms of business • Loan associations • Operate quite similarly as banks but not large in terms of infrastructure and may not have many people operating. • Professional services • Doctors, Lawyers, Dentists, Consultants are individuals who are professionals in their respective fields. Those types of businesses can be called as professional service firms. www.AssignmentPoint.com

  15. Conclusion • Recap of topics • Sole Proprietorships • Partnerships • Corporations • Mergers • Cooperatives • Loan associations • Professional services www.AssignmentPoint.com

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