Ch. 8-1

1. Ch. 8-1 • Getting Started • People who decide to start a business and are willing to take risk 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.

2. 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: tracking all your expenses and income • Risk: balancing the risk against the advantages of being self employed

3. 8-2 • Sole Proprietorships • A business owned by one person, known as the proprietor • The biggest advantage is that the owner recieves all the profits and has full control of the business. • The biggest disadvantages 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

4. Partnerships • 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 the end of partnership. • The biggest advantage is that the partners share control and profits.

5. d. The biggest disadvantage is the partners have unlimited liability. e. Limited partnerships are businesses in which partners are not equal. f. Limited partners have no liability beyond their initial investment g. General partners are fully responsible for debts of company. h. Joint ventures are temporary partnerships set up for a specific purpose, it is dissolved after it has accomplished its goal.

6. 8-3 • Why Form a Corporation? a. The need for financial capital b . Wanting financial backers who will lend funds without having a hand in the business.

7. Corporation a. organization owned by many people but treated by laws as if it were a person b. can own property, pay taxes, make contracts, sue and be sued c. Corporations have a distinct existence from stockholders

8. d. Major advantage is stockholders have limited liability; they are not personally responsible, only the business loses money and assets. e. Major disadvantage is corporations pay more taxes than other forms of business organizations.

9. Stock • 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 stock holders have first claim on assets left over if a corporation goes out of business. • 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 business.

10. Franchises a. Contract in which a franchiser sells to another business the right to use its name and sell its product b .franchises pay a fee that could include a percentage of all money taken in. c. often have training programs to teach the franchisee and to set the standards of business operations.