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Questions and Answers
What new way of doing business has emerged as a significant trend in small-business start-ups?
What new way of doing business has emerged as a significant trend in small-business start-ups?
Which group has seen an increase in small business ownership according to recent trends?
Which group has seen an increase in small business ownership according to recent trends?
What percentage of new start-ups can expect to survive for at least four years?
What percentage of new start-ups can expect to survive for at least four years?
What is a common reason for the failure of small businesses?
What is a common reason for the failure of small businesses?
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Which factor is NOT listed as a reason for small business success?
Which factor is NOT listed as a reason for small business success?
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What trend involves entrepreneurs exploring new markets outside of their home countries?
What trend involves entrepreneurs exploring new markets outside of their home countries?
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Which of the following does NOT represent a reason for business failure?
Which of the following does NOT represent a reason for business failure?
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The trend of individuals starting businesses after leaving large corporations is referred to as what?
The trend of individuals starting businesses after leaving large corporations is referred to as what?
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What is a franchise agreement?
What is a franchise agreement?
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Which of the following is an advantage of franchising?
Which of the following is an advantage of franchising?
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What is a common disadvantage associated with starting a franchise?
What is a common disadvantage associated with starting a franchise?
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Which of the following is NOT a viable method for financing a small business?
Which of the following is NOT a viable method for financing a small business?
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What is the primary role of a Small-Business Investment Company (SBIC)?
What is the primary role of a Small-Business Investment Company (SBIC)?
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Which question is essential for someone starting a business from scratch?
Which question is essential for someone starting a business from scratch?
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What is the focus of a venture capital company?
What is the focus of a venture capital company?
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What must a franchisor provide to a franchisee as part of their agreement?
What must a franchisor provide to a franchisee as part of their agreement?
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Who is considered the owner of shares of stock in a corporation?
Who is considered the owner of shares of stock in a corporation?
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What is the primary responsibility of the Board of Directors?
What is the primary responsibility of the Board of Directors?
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Which of the following is NOT a type of corporate ownership issue?
Which of the following is NOT a type of corporate ownership issue?
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What do Employee Stock Ownership Plans represent?
What do Employee Stock Ownership Plans represent?
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What is a primary goal of a corporation's top management team?
What is a primary goal of a corporation's top management team?
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Which of the following describes a disadvantage of corporations?
Which of the following describes a disadvantage of corporations?
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Which of the following entities is responsible for sustaining the assets of a corporation?
Which of the following entities is responsible for sustaining the assets of a corporation?
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What is one common reason for the failure of small businesses?
What is one common reason for the failure of small businesses?
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What distinguishes a closely held corporation from a publicly held corporation?
What distinguishes a closely held corporation from a publicly held corporation?
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Which type of corporation is treated as a partnership for tax purposes?
Which type of corporation is treated as a partnership for tax purposes?
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What is a feature of a Limited Liability Corporation (LLC)?
What is a feature of a Limited Liability Corporation (LLC)?
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Which type of corporation allows professionals to have limited business liability?
Which type of corporation allows professionals to have limited business liability?
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What characterizes a multinational corporation?
What characterizes a multinational corporation?
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What is a primary function of corporate governance?
What is a primary function of corporate governance?
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What does a publicly held corporation offer that a closely held corporation typically does not?
What does a publicly held corporation offer that a closely held corporation typically does not?
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In which type of corporation are owners taxed as partners while enjoying limited liability?
In which type of corporation are owners taxed as partners while enjoying limited liability?
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What is a key characteristic of entrepreneurial personalities?
What is a key characteristic of entrepreneurial personalities?
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What defines a small business in terms of its contribution to the economy?
What defines a small business in terms of its contribution to the economy?
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What is one main reason businesses fail?
What is one main reason businesses fail?
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Which of the following is an advantage of a sole proprietorship?
Which of the following is an advantage of a sole proprietorship?
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What is distinctive competence related to small businesses?
What is distinctive competence related to small businesses?
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Which type of business structure involves two or more individuals sharing profits and liabilities?
Which type of business structure involves two or more individuals sharing profits and liabilities?
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What are cooperatives primarily focused on?
What are cooperatives primarily focused on?
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What characterizes a niche market?
What characterizes a niche market?
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What is one identified trend in small business start-ups?
What is one identified trend in small business start-ups?
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What is a key characteristic of entrepreneurship?
What is a key characteristic of entrepreneurship?
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How does first-mover advantage benefit a firm?
How does first-mover advantage benefit a firm?
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What is the purpose of a business plan?
What is the purpose of a business plan?
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Which of the following is NOT a method of starting a small business?
Which of the following is NOT a method of starting a small business?
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What aspect is typically included in crafting a business plan?
What aspect is typically included in crafting a business plan?
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What best describes resourcefulness as an entrepreneurial characteristic?
What best describes resourcefulness as an entrepreneurial characteristic?
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What is a fundamental goal of financial planning in a business plan?
What is a fundamental goal of financial planning in a business plan?
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Study Notes
Chapter 3: Entrepreneurship, New Ventures, and Business Ownership
- This chapter examines converting business ideas into profitable ventures, assessing market potential for new and emerging businesses, and analyzing business plans, success factors, and failure reasons.
- It also explores the advantages and disadvantages of various ownership structures.
Introduction
- The chapter details the processes of turning a business idea into a successful enterprise.
- It delves into evaluating the potential of new and developing business sectors.
- The business plan, including reasons for success and failure, is a key part of the discussion.
- Different ownership structures and their respective benefits and drawbacks are considered.
Learning Objectives
- Objective 1: Defining small businesses, detailing their significance to the U.S. economy, and outlining common small business sectors.
- Objective 2: Defining entrepreneurship and outlining key characteristics of entrepreneurial personalities and activities.
- Objective 3: Defining distinctive competence, describing business plans, and detailing start-up decisions and financial assistance resources for small businesses.
- Objective 4: Identifying trends in small business start-ups and analyzing causes for success and failure.
- Objective 5: Defining sole proprietorships, partnerships, and cooperatives, along with their advantages and disadvantages.
- Objective 6: Characterizing corporations, investigating their advantages and disadvantages, and distinguishing different corporate structures while discussing issues involved in management.
What is a "Small" Business?
- A small business is independent and has limited influence within its market and doesn't belong to a larger enterprise.
- The SBA (Small Business Administration) supports small businesses.
The Importance of Small Business in the U.S. Economy
- Nearly 90% of U.S. businesses employ fewer than 20 people.
- Small businesses contribute significantly to the U.S. workforce.
- Small businesses drive job creation in high-tech sectors and often lead the economic recovery.
- Small businesses drive innovation.
- Small businesses contribute to larger established companies.
Popular Areas of Small-Business Enterprise
- Small businesses are heavily concentrated in services (approximately 55.8%).
- Retailing (about 11.8%) and construction (about 12.1%) round out the top three sectors.
Entrepreneurship
- An entrepreneur is a businessperson who takes on the risks of launching and operating a new business.
- Entrepreneurship is the process of seeking business opportunities within uncertain environments.
Entrepreneurial Characteristics
- Key traits include resourcefulness, customer care, desire for independence, and managing uncertainty and risk.
Understanding Distinctive Competencies
- An established market is one with numerous competing firms, working within predefined parameters.
- A niche market is an underserved portion of an existing market.
First-Mover Advantages
- First-mover advantage is a benefit to a firm gained by being the first to exploit an emerging market.
Starting and Operating a New Business
- A business plan is a document that describes the new business strategy and illustrates its implementation.
Crafting a Business Plan
- Components include setting goals and objectives, sales forecasting, and financial planning.
Starting the Small Business
- Options include purchasing an existing business, franchising, or starting from scratch.
Franchising
- A franchise is a business arrangement where a buyer acquires the right to sell a seller's goods or services.
- Franchises offer advantages such as proven business models and management expertise but involve upfront and ongoing costs, as well as various management rules and restrictions.
Starting from Scratch
- Crucial questions when starting a business from scratch involve determining target customers, pricing strategies, estimated sales volumes, competition, and consumer demand for the product.
Financing a Small Business
- Options include using personal resources, loans from family and friends, bank loans, venture capital, Small Business Investment Companies (SBICs), Minority Enterprise Small Business Investment Companies (MESBICs), and SBA programs.
Trends in Small-Business Start-Ups
- E-commerce, and crossovers from larger businesses are emerging trends.
- Increased opportunities exist for minorities and women.
Reasons for Failure
- Common reasons for small business failure include managerial incompetence or inexperience, neglect, weak control systems, and insufficient capital.
Reasons for Success
- Reasons for success include hard work, drive, dedication, market demand for goods/services, managerial competence, and luck.
Noncorporate Business Ownership
- Sole Proprietorship: This is a business owned by one person, holding sole responsibility for the business's debts.
- General Partnership: A partnership involves two or more owners sharing operating duties, and financial responsibilities for all business debts.
Sole Proprietorship
- Advantages: Freedom, ease of formation, low initial costs, and tax benefits.
- Disadvantages: Unlimited liability, limited resources, difficulties raising additional capital, and lack of continuity beyond the owner's control.
Partnerships
- Advantages: More resources, easier formation, and tax benefits.
- Disadvantages: Potential for disagreements amongst partners, unlimited liability for general partners, and lack of continuity.
Comparative Summary: Three Forms of Business Ownership
- This table summarizes the three ownership structures, comparing liability, continuity, management, and capital sources.
Alternatives to General Partnerships
- Limited Partnerships allow limited partners to invest without assuming full liability; General partners operate the business.
- Master Limited Partnerships give the master partner majority ownership and operational control, while minority partners lack management input.
Cooperatives
- Cooperatives combine the flexibility of sole proprietorships with the financial strength of corporations.
- Partnerships or sole proprietorships collaborate to achieve shared benefits.
Proportions of U.S. Firms in Terms of Organization Type and Sales Revenue
- Corporations tend to be bigger and hold a smaller percentage of businesses but account for much of the revenue.
- Proprietorships make up a greater percentage of businesses but a smaller percentage of sales revenue.
The Corporate Entity
- Corporations are legally distinct from their owners, and owners are liable only up to their investment.
Corporations
- Advantages: Limited liability, continuity, and strong fundraising capabilities.
- Disadvantages: Potential for takeover against management wishes, double taxation of profits, and complex formation processes.
Types of Corporations
- Different corporate structures exist, each with its own characteristics.
- Closely held corporations, publicly held corporations, S corporations, limited liability corporations (LLCs), and multinational corporations are further categorized, each with specific regulations and features.
Managing a Corporation
- Corporate governance outlines the roles of shareholders, directors, and officers in decision-making and accountability.
Special Issues in Corporate Ownership
- These include joint ventures, employee stock ownership plans, institutional ownership, mergers, divestitures, and spin-offs.
Applying What You've Learned
- Key aspects of small businesses, entrepreneurship, business plans, and financing are reviewed.
- Additional learnings include different types of business ownership structures.
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Description
This quiz covers Chapter 3 focused on entrepreneurship, new ventures, and business ownership. It explores the transformation of business ideas into profitable practices and evaluates market potential, business plans, and ownership structures. Test your understanding of key concepts related to small businesses and the factors leading to their success and failure.
