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5. Chapter. Forms of Business Ownership and Organization 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Learning Objectives. Discuss why most businesses are small businesses. Determine the contributions of small businesses to the economy.

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    1. 5 Chapter Forms of Business Ownership and Organization

    2. 1 2 3 4 5 6 7 8 9 10 Learning Objectives Discuss why most businesses are small businesses. Determine the contributions of small businesses to the economy. Discuss why small businesses fail. Describe the features of a successful business plan. Identify the available assistance for small businesses. Explain franchising. Outline the forms of private business ownership. Describe the public and collective ownership of business. Discuss organizing a corporation. Explain what happens when businesses join forces.

    3. 90% of firms with employees have fewer than 20 people on staff. 98% have fewer than 100 employees More than 20 million people in the United States earn business income without employees. Almost ½ the sales in the United States are made by small businesses. Small businesses generated 60%--80% of new jobs over the last decade. Small businesses are a launching pad for entrepreneurs and encourage the prevalence of minorities. Most Businesses are Small Businesses

    4. The Small Business Administrationdefines a small business to be a firm that is independently owned and operated and is not dominant in the field. Manufacturing business: fewer than 500 workers Wholesalers: fewer than 100 workers Retailers: less than $6 million in annual sales Agricultural business: less than $750,000 Small businesses’ sizes range from $500,000 to $25 million in sales and from 100 to 1,500 employees. What is Small Business?

    5. Typical Small-Business Ventures

    6. Major Industries Dominated by Small Businesses

    7. 52% of small businesses 16 million Allows for more control of business Allows for more control of personal time Keeps start-up and operating expenses low Owner can feel isolated and business has less visibility to customers Home-Based Businesses

    8. Create New Jobs Account for 30% of U.S. Exports Offer Customized Services Create New Industries Encourage Innovation Contributions of Small Business

    9. 3 in 10 businesses close permanently within two years. 50% of businesses fail within five years. By the 10-year mark, 82% of all small businesses have closed permanently. Small Business Failure

    10. Management Shortcomings Inadequate Financing Government Regulation Reasons Why Small Business Fail

    11. Creating a Business Plan Written documentation that provides orderly statement of goals, methods, and purpose Discusses the company’s mission and vision Analyzes unique advantage, customers, and competition Increasing the Likelihood of Small Business Success

    12. Sources of Small Business Financing

    13. Government agency concerned with helping small business firms Financial Assistance Loan Guarantees Microloans Small Business Investment Companies (SBICs) Active Capital: SBA Loans Small Business Administration

    14. Set-Aside Programs Government Contracts (over 23%) 5% for women and minorities Assistance in Financing Government Procurement Business Incubators Local community initiatives to share resources for small start-ups SCORE: Counselors to America’s Small Business Small Business Development Centers (SBDC) Other Specialized Assistance

    15. Small-business owners soon look for greater sums of money in order to continue operating and eventually grow. Venture capital is money invested in the small business by another business firm or group of individuals in exchange for an ownership share. Venture capitalists look for companies in which to invest even when the economy is sluggish. Recently, investors have expressed optimism and a focus on information technology, such as the Internet, cloud computing, and mobile/telecom. Venture capitalists usually have tough requirements for a solid business plan. Private Investors

    16. More than 40% of U.S. businesses are owned by women (10 million businesses) The number of businesses owned by minorities outpaced the growth in the number of U.S. businesses overall. Women and minorities still face challenges: Smaller-scale operations Challenges finding investors Access to capital Opportunities for Women & Minorities

    17. Minority-Owned Businesses

    18. A contractual business agreement between a manufacturer or another supplier and a dealer to produce and market the supplier’s good or service. Links to franchising opportunities: Subway Entrepreneur The Franchising Alternative

    19. Franchising agreements exist between franchisee and franchisor. 50% of all retail sales 760,000 businesses 18 million jobs $500 billion in payroll Near $2 trillion in sales New franchise opens every 8 minutes Franchising overseas is a growing trend The Franchising Agreement

    20. ADVANTAGES Prior Performance Record Recognizable Company Name (Brand) Proven Business Model Tested Management Program Savings through Volume Purchases Benefits and Problems of Franchising DISADVANTAGES • Franchise Fees • Future Payments (Royalties) • Linked to Reputation and Management • Franchise Agreement Restrictions • Tight Control

    21. Alternatives for Organizing a Business

    22. Forms of Private Ownership

    23. Financial Situation Management Skills and Limitations Management Styles and Capabilities Exposure to Liability Legal Structures to Meet Changing Needs

    24. Domestic, foreign, alien S Corporation Limited Liability Companies Employee-Owned Corporations Not-for-Profit Corporations Types of Corporations

    25. Public ownership – a unit or agency of government owns and operates an organization. Parking structures, water systems, turnpike authority. Customer-Owned Businesses – collective ownership of a production, storage, transportation or marketing organization is a cooperative. Public and Collective Ownership

    26. Stockholders – acquire stocks in exchange for ownership Preferred Stock Common Stock Board of Directors – elected by stockholders to oversee corporation Corporate Officers & Management – make major corporate decisions and handle ongoing operations Corporate Management

    27. Mergers and Acquisitions (M&A) Merger – combination of two or more firms to form one company Vertical Horizontal Conglomerate Acquisition – procedure in which one firm purchases the property and assumes the obligations of another Joint Venture – partnership between companies for a specific purpose When Businesses Join Forces