Types of Businesses & Entrepreneurship

1. Types of Businesses & Entrepreneurship 5.2/33.1/33.2

2. Business classifications • A business may be classified by • its size & scope • by its purpose • or its place within the industry

3. Business classifications • SIZE Large vs Small • more than 1000 employees= Large • fewer than 100 employees = Small • SCOPE Domestic vs. Global • limits its scope to 1 country= Domestic • sells products in more than 1 country= Global

4. Business classifications 2. PURPOSE • For-Profit • businesses seek to make profit from its operations • Examples: Ruby Tuesday, The Blue Door Boutique, Publix • Nonprofit Organization • functions like a business • money it makes fund a cause (it goes back into the business). • generate revenue through gifts/donations/grants/etc. • some may sell goods or services • usually do not have to pay taxes on their income. • Examples: The Red Cross, DECA, Boy Scouts of America, Headstart

5. Business classifications 2. PURPOSE • Public Sector • Government financed agencies that operate like businesses but are not intended to earn a profit. • Examples include public schools and libraries, military agencies (Army), and social agencies like Social Security and Medicare • Private Sector • Businesses not associated with government agencies

6. Business classifications • Their place within the industry • Businesses are often classified according to the industry they represent, the products they sell, and the markets they target. • Wholesalers vs. Retailers • 1st a product must be produced (manufactured) and then sold to wholesalers or retailers. • Wholesalers obtain goods from manufacturers and resell them. Wholesalers are also called distributors. • Retailers buy goods from wholesalers or directly from manufacturers and resell them to the consumer.

7. Entrepreneurship • Entrepreneurs make major contributions to our economy. • Entrepreneurs own and operate their own business • Free enterprise system is built on entrepreneurship • Advantages: personal freedom, personal satisfaction, increased income • Disadvantages: high level of stress, the risk of failure, potential loss of income, long and irregular hours, the need to handle multiple tasks and strong self discipline

8. Business Ownership Opportunities • 4 ways to enter a business: • Purchase an existing nonfranchise business • Take over a family business • Start a new business • Purchase a franchise business

9. Forms of Business Organization • The choice of legal organization or structure of a new business is a critical decision. • There are 4 possible forms of business organization: • Sole proprietorship • Partnership • Corporation • Limited liability company (LLC) • The choice depends on the financial and tax situation of the owner, the type of business, the number of employees, and the level of risk.

10. Sole Proprietorship • A business owned and operated by 1 person. • Most common form of business ownership • Approximately 70% of all businesses

11. Partnership • Legal agreement between 2 or more people to be jointly responsible for the success or failure of a business. • 10% of US businesses • Examples: law offices, medical offices, real estate agencies • 2 types of partnerships: general and limited

12. Partnership

13. Corporation • A business that is owned by several people but is considered to be just one person or entity under the law. • Several unique features: • Separate legal entity: operates as its own self, liable for itself. • Stockholders: ownership of a corporation is divided into shares of stock. If the corporation sells stocks, it is one way to raise money. The owners of a corporation are the stockholders. • Board of directors: stockholders own the corporation, but often do not manage it. Stockholders elect a board of directors that is responsible for major decisions. • Chief Executive Officer: CEO

14. Corporation • Corporations offer owners limited liability. • Limited liability means that the personal assets of the owners cannot be taken if the company does not meet its financial obligations or if it gets into legal trouble. • A corporation is not affected by the death, of an officer of shareholder.

15. Corporation

16. Limited Liability Company (LLC) • New form of business organization • A hybrid of a partnership and a corporation • Its owners are shielded from personal liability and all profits and losses pass directly to the owners without taxation of the entity itself