Business Structures Overview

Business Structures

• Sole Proprietorship: Owned and run by one person. Owner is personally responsible for all business debts (unlimited liability). Easy to set up, but raising capital can be challenging. This structure is simple to manage.

• Partnership: Owned by two or more people. Profits and losses are typically shared. Partnerships can be general (all partners manage) or limited (some partners only invest). Shared responsibility and potentially greater capital are advantages. However, unlimited liability (except in limited partnerships) can be a disadvantage.

• Corporation: A separate legal entity from its owners (shareholders). Shareholders have limited liability. Requires complex structures, like board meetings, but can raise substantial capital through selling shares. This structure allows for the raising of substantial capital.

• Franchise: A business model where an individual (franchisee) pays for the ability to operate a business using an established brand, products, and business model (franchisor). Advantages include an existing brand, support from the franchisor, and often lower risk. Disadvantages can include high startup costs and limited control over the business. This offers a pre-built model.

Basic Accounting Concepts

• Revenue, Expenses, Profit: Revenue is the total money earned from sales. Expenses are the costs to create revenue (rent, salaries). Profit is revenue minus expenses. Losses occur if expenses exceed revenue.

• Balance Sheets: Assets are what the business owns (cash, inventory, equipment). Liabilities are what the business owes (loans, accounts payable). Owner's Equity is the owner's claim after liabilities are subtracted from assets (Assets – Liabilities = Equity.)

• Trade Deficit vs. Trade Surplus: A trade deficit occurs when a country imports more than it exports (negative balance). A trade surplus occurs when a country exports more than it imports (positive balance).

Economic Basics

• Law of Demand: As price decreases, quantity demanded increases, all else being equal.

• Law of Supply: As price increases, quantity supplied increases, all else being equal.

• Factors of Production: Land (natural resources), Labor (human effort and skills), Capital (machinery, tools, and buildings), and Entrepreneurship (initiative to combine the other factors to generate goods and services).

• Trade (Imports, Exports, Balance of Trade): Imports are goods/services bought from other countries; Exports are goods/services sold to other countries. The balance of trade is the difference between exports and imports (trade deficit/surplus).

Marketing Concepts

• Four Ps of Marketing: Product (features, quality), Price (cost, strategies), Place (distribution channels), Promotion (advertising).

• Market Research and Consumer Needs: Market research helps businesses understand customer preferences and behavior, thereby tailoring products and services.

• Product Life Cycle: Introduction, Growth, Maturity, Decline.

• Niche Markets: Smaller segments of the market with specific needs or interests. Businesses target niche markets to differentiate and specialize.

International Trade

• Hard Currencies vs. Soft Currencies: Hard currencies are strong, stable currencies (USD, Euro) widely accepted in global trade. Weak, volatile currencies are soft currencies.

• Non-Tariff Barriers vs. Tariffs: Tariffs are taxes on imports, intended to make them more expensive and protect domestic industries. Non-tariff barriers are restrictions, other than tariffs, limiting trade. (e.g., quotas, licensing requirements)

• Major Trading Partners: The USA is a major trading partner for many countries.

Business Financing

• Debt Financing vs. Equity Financing: Debt financing is borrowing money (loans, bonds), requiring repayment with interest. Equity financing is raising capital through selling shares in the company.

• Dividends and Investments: Dividends are payments to shareholders from a company's profits; Investments are allocating capital to assets to generate future return (stocks, bonds, real estate).

Human Resources

• Hiring, Training, Professional Development: Hiring is recruiting employees; Training provides necessary skills; Professional Development involves continuing education to advance careers.

Corporate Social Responsibility (CSR)

• Ethical Business Practices: Socially responsible operation, considering the impact on employees, customers, society.

• Environmental and Social Costs: Businesses must account for their environmental and social impact (pollution, resource depletion) and take action to mitigate harm.

Entrepreneurship

• Traits of Entrepreneurs: Risk-taking, innovation, determination, leadership, adaptability.

• Risks and Benefits of Starting a Business: Risks include financial loss, time commitment, uncertainty; Benefits include potential profit, independence, and personal satisfaction.

Tips for Studying

• Understand Key Terms: Know meanings and applications (assets, liabilities, equity, trade surplus).

• Apply Concepts to Real-World Examples: Analyze how concepts (Four Ps, trade deficits) play out in the real world.

• Practice Calculations: Interpret balance sheets, calculate profit, understand trade balances.

• Use Case Studies: Analyze real businesses to see how concepts apply (sole proprietorship vs. corporation).

Explore the key types of business structures including sole proprietorships, partnerships, corporations, and franchises. Understand how each structure impacts ownership, liability, and capital raising. This quiz will help you learn about the advantages and disadvantages of each type.