ZWANE ND 201027399

Business Characteristics

What is a Business?

Organization that produces or distributes a good or service for profit

Profit – difference between a business’ revenue (income) and expenses (costs)

THREE BASIC QUESTIONS

o What does my business look like?

o What resources do I need?

o How do I feet into the rest of the world?

Structures Sole trader Partnership Company including QC’s Unincorporated joint ventures Trusts Limited liability partnerships

Business Activities

Each business participates in at least three major activities

1. Production – making a product or producing a service Manufacturing firms – produce goods (ex. Ford

Motor Company) Service firms – provide assistance to accomplish

specialized needs (ex. doctor, real estate agent)

Types of Businesses

1. Industrial – produce goods used by other businesses or organizations to make things (ex. company that produces medical products that are used by hospitals)

Industrialized nations (ex. U.S., Japan, Germany) produce thousands of products compared to the number of products produced by third world nations

Third world nations – few manufacturing firms and relatively poor

Types of Businesses (cont’d)

2. Commercial – engaged in one of the following activities Marketing (ex. wholesalers and retailers) Finance (ex. banks and investment companies) Services (ex. doctors, fitness facilities, and lawn

care) – intangible products that use primarily labor to satisfy consumer needs

Sole TraderAdvantagesSimpleEasy to form / terminateFew legal formalitiesLittle regulationLower start up costSome tax benefitsNo requirement to publish financial statements

DisadvantagesUnlimited personal liabilityHigher tax if > $40k profitMore difficult to maximise business sale pricePersonal responsibility for acts of employees re business activitiesDependence on others outside business for skills lacking

What is Liability

The state of being legally obliged and responsible If your business is sued and does not have enough assets

to cover the amount, your personal assets are sold to cover the difference.

Results in Bankruptcy We live in a litigious society

Industry

Refers to all businesses within a category The Occupational Outlook Handbook breaks down industries by

occupations Ex. Business and Financial Operations Occupations Click on this link to see the number of people employed in

certain occupational categories and the individual occupations under each category

Individual Well-Being

Second measure of a nation’s wealth GDP helps in judging the overall growth of an economy;

tells little about the economic worth of individuals Increase income improves the level of living of an average

family Ex. number of families living in home they own,

number of adults receiving education after high school

Entrepreneurship

Entrepreneur – starts, manages, and owns a business Growth of business within the U.S. resulted from

Individuals wanting to own their own businesses Easy to start a business

Other Types of Businesses

Partnership – Just like a Sole Proprietorship with more than one owner. Income reported on personal income tax – divided according

to partner interest. No liability protection

Advantages of Starting Your Own Business

Independence Satisfaction Challenge of creating something new Triumph when business is profitable

Disadvantages of Starting Your Own Business

RISKSUncertainty of demand for the

product/serviceNeed to make decisions daily

Small Business

Any business that is operated by one or a few individuals Few small businesses produce goods since it is costly Many are one-person or family operations Examples – restaurants, gas stations, consultants working

from home with the use of a computer

Franchise Business

Franchise – legal agreement in which a distributor buys the right to sell the franchising company’s product or service under the company’s name and trademark

Examples – Subway, Bruster’s Franchisor – parent company of a franchise agreement

that provides the product or service Franchisee – distributor of a franchised product or service 5 to 10 percent of franchised businesses fail; much lower

than non-franchised businesses

Own a Franchise or Start a BusinessThere are several ways of going into business and becoming anentrepreneur. You can:Purchase an existing businessEnter a family businessPurchase a franchiseStart your own businessStart your own business

Causes of Business Failures

Almost two-thirds of businesses fail from economic causesIndustry weakness, low profits, and low salesOther causes of business failure includeFinance causes (ex. expenses/debts)Disaster and fraud (ex. hurricanes/theft)Neglect causes (ex. poor work habits)Strategy causes (ex. overexpansion)Experience causes (ex. inadequate planning)

ReferenceBell, E. (2010). Business management. Effie Bell .C. Greene. (2000). Entrepreneurship Ideas in Action. South-Western. : Cincinnati, OH.Evarard. (2001). Business Principles and Management. . South-Western: Mason, OH.Higgs, P. (2009). Structuring Business Ownership. New Zealand: New Zealand Institute of Accountants.Redpath, T. (2007). Different Forms of Entrepreurship. Toronto: MaRS Centre 101 College.