Business Structures and Ownership

Business Structures and Ownership

• Sole Proprietorship: Owned and run by one person; unlimited liability (owner personally responsible for business debts); simple to set up and manage, but harder to raise capital.
• Partnership: Two or more people share ownership, profits, and losses typically shared; can be general (all partners manage) or limited (some partners are only investors); advantages: shared responsibility, more capital; disadvantages: unlimited liability (except in limited partnerships).
• Corporation: A legal entity separate from its owners (shareholders); limited liability for shareholders; more complex structure with requirements for board meetings and formalities; can raise large amounts of capital by issuing shares.
• Franchise: A business model where an individual (franchisee) pays for the rights to operate a business using the franchisor’s brand, products, and business model; advantages: established brand, support, lower risk; disadvantages: high initial cost, less control.

Basic Accounting Concepts

• Revenue, Expenses, Profit: Revenue = total sales income; expenses = costs (e.g., rent, salaries) to generate revenue; profit = revenue - expenses; loss = expenses > revenue.
• Balance Sheet: Assets = what the business owns (e.g., cash, inventory, equipment); liabilities = what the business owes (e.g., loans, accounts payable); owner's equity = owner's claim after liabilities subtracted from assets (Assets - Liabilities = Equity).
• Trade Deficit/Surplus: Trade Deficit = imports > exports; Trade Surplus = exports > imports.

Economic Basics

• Law of Demand: Price decrease leads to increased quantity demanded.
• Law of Supply: Price increase leads to increased quantity supplied.
• Factors of Production: Land (natural resources), labor (human effort and skills), capital (machinery, tools, and buildings used in production), entrepreneurship (initiative to combine land, labor, and capital).
• Trade (Imports, Exports, Balance of Trade): Imports = goods/services bought from other countries; Exports = goods/services sold to other countries; Balance of Trade = difference between exports and imports (trade deficit/surplus).

Marketing Concepts

• Four Ps: Product (features, quality), Price (strategies, discounts), Place (distribution channels), Promotion (advertising, sales promotions).
• Market Research & Consumer Needs: Market research understands customer preferences and behavior; understanding needs helps with product/service tailoring.
• Product Life Cycle: Introduction (new product launch), Growth (rising sales, competition), Maturity (peak sales, saturation), Decline (sales drop, phase-out).
• Niche Markets: Smaller segments with specific needs/interests; businesses target niche markets for differentiation and specialization.

International Trade

• Hard vs. Soft Currencies: Hard currencies (e.g., USD, Euro) are strong, stable, and widely accepted; soft currencies (e.g., Zimbabwean dollar) are weaker and more volatile.
• Non-Tariff Barriers vs. Tariffs: Tariffs are import taxes; non-tariff barriers are other trade restrictions (quotas, licensing).
• Major Trading Partners: The USA is a major trading partner, importing and exporting various goods and services.

Business Financing

• Debt vs. Equity Financing: Debt financing = borrowing money (loans, bonds); equity financing = selling company shares.
• Dividends & Investments: Dividends = payments to shareholders from profits; investments = allocating capital to assets for future returns (stocks, bonds, real estate).

Human Resources

• Hiring, Training, Professional Development: Hiring = recruiting employees; training = providing necessary skills; professional development = continued education and skills development.

Corporate Social Responsibility (CSR)

• Ethical Business Practices: Socially responsible operations concerning employees, customers, and society.
• Environmental and Social Costs: Businesses must account for environmental and societal impacts (pollution, resource depletion) and minimize harm.

Entrepreneurship

• Traits of Entrepreneurs: Risk-taking, innovation, determination, leadership, adaptability.
• Risks & Benefits: Risks include financial loss, time commitment, uncertainty; benefits include profit potential, independence, personal satisfaction.

Test your knowledge on various business structures including Sole Proprietorships, Partnerships, Corporations, and Franchises. Understand the advantages and disadvantages of each form of ownership, as well as basic accounting concepts. Perfect for students studying business fundamentals.