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Examination Describe Different Types of Businesses
Examination II
Name:
Institutional Affiliation:
Chapter 04
Question 1
Part I: Describe Different Types of Businesses
Sole proprietorship
A sole proprietorship is a type of business entity where an individual is the owner of the business. The individual runs the business on their own and is responsible for any debts and liabilities that the business may incur.
Partnership
A partnership is a form of business where two or more entities own the business jointly. The parties can either be individuals or companies because a company is recognized as legal person by law. The partners share the responsibilities of the business as well as the profits.
Corporation
A corporation is a business organization or entity that is formed by several individuals, but it is separate from those individuals. A corporation is run by a board of directors.
S-Corporation
This is a type of corporation that meets some tax requirements under the Internal Revenue Code. The S-corporation must have less than a 100 shareholders but it is taxed as a partnership.
Limited Liability Companies
An LLC has both the characteristics of a corporation and a partnership or a sole proprietorship. The owners of the LLC do not have personal responsibility of the liabilities or debts of the business entity.
Part II: Chart of Key Terms for each Business Type
Business Type Advantage Disadvantage
Sole Proprietorship Double taxation-only taxed once at personal level.
Start-up costs- low.
Transfer of ownership-simple because it involves one person. Unlimited Liability-owners are personally responsible for debts.
Ability to raise capital and credit-limited.
Continuity- limited because operations can be affected and halted by a disaster.
Partnership Ability to raise capital and credit-several partners can easily raise capital
Double Taxation-taxed only once
Start up costs- depends on the size of the entity Unlimited Liability-partners share responsibility and debts.
Continuity-can be limited if it is a small size
Transfer of ownership-can be challenging because of partners
Corporation Unlimited liability-owners are not personally liable.
Ability to raise capital and credit- very high because it is created by many people
Continuity-more certain because it is a large entity
Double taxation-taxed at corporation and personal levels.
Start-up costs-high because it is large
Transfer of ownership- difficult because of many owners
S-Corporation Unlimited liability-partners not personally liable
Ability to raise capital and credit-high because of 100 shareholders or less
Start-up costs-many shareholders contribute to costs.
Continuity- more certain
Double Taxation-taxes at corporation and personal level.
Transfer of ownership-many partners involved
Limited Liability Companies Unlimited Liability- partners not personally liable for debts
Ability to raise capital and credit-high
Continuity-is high is the company is large.
Double taxation-at company and individual levels.
Start-up costs-depend on size of the entity
Transfer of ownership-difficult because of many partners
Part III: Define Key Terms
unlimited liability
This applies to general partnerships as well as sole proprietorships. Here, the owners of the business can be held personally liable for any debts or responsibilities of their company.
ability to raise capital and credit
This refers to extent to which an entity can access funds for capital, or get loans from lenders such as banks. Funds from capital can be raised through sale of shares or equity.
double taxation
This refers to a situation where income from the same source is taxed twice, for example when a corporation earns profits it is taxed, and also when it transfers profits to shareholders the shareholders are again taxed on the same income.
start up costs
These are all the one-time expenses incurred in setting up a business. They include registration fees, advertising, and employee training among others.
continuity
This is the ability of the business enterprise to maintain its operations especially during and after a disruption or disaster affecting business operations.
transfer of ownership
This refers to moving property from one entity to another, and it can be done in several ways including selling a company.
Question 2
Part I: Why is it important to have a partnership agreement?
Some of the reasons to have a partnership agreement include:
a clear definition of the rights and responsibilities of partners
ways to handle conflicts that may arise between them (Hillman 2005)
outline the rules of managing the company and
Protect the investments that the owner and other investors have made in the company.
Part II: Make a listing of what should be included in the legal written Partnership Agreement document.
Percentage of ownership
When setting up a business entity, each partner makes some contributions and this should be clearly written down in the partnership agreement to avoid future disagreements.
Division of Losses and Profits
Most of the time partners share profits and losses based on the percentage of ownership, while other times they are shared equally regardless of a partner’s stake in the company (Neville 2013). A clear explanation of this will help avoid any conflicts in future of the business.
Authority
Partners have the authority to bind the company or business entity to some contracts such as debts. The partnership agreement should clearly define the authority that every partner has to do this because it can expose the company to a high level of risk.
Resolving disputes and Decision Making
Conflicts and disputes are an inevitable part of any partnership, and the partners must outline how they will handle any conflicts that will arise in the course of their partnership. This is usually done through a mediation clause which allows the partners to solve issues without resorting to a court process. Making decisions will also become an issue, and partners establish processes such as voting to create balance in power.
Length of the partnership
Some partnerships are created to last for an unspecified period of time, while others will end after a while or after achieving a set goal. The legal agreement should include this information.
Withdrawal and Death
When a partner dies or decides to leave, there must be provisions such as sales agreements to allow them sell their stake in the company.
Question 3
Explain why a small business owner can be an entrepreneur even though some say they are completely different.
Many people use the words small business owner and entrepreneur interchangeably, but there are several characteristics that distinguish the two. A person can be a small business owner as well as an entrepreneur, and a person can also be a small business owner but not an entrepreneur. To better understand the two terms, it is imperative to understand some of the characteristics of an entrepreneur. Entrepreneurs do what they love because they are passionate about it. They may run a small business or a billion-dollar company but it is not about the money for them (Marks 2012). Some small business owners set up their businesses purely for financial motivations but have no passion for it, and this means they are not entrepreneurs.
Entrepreneurs are always on the look-out to create and utilize innovations and new ways of doing things, while small business owners may not care about this. Entrepreneurs can divide their focus on many different projects or move from one project to another. Small business owners on the other hand tend to concentrate all their efforts on one thing. Additionally, entrepreneurs look for capital from different investors while small business owners use mostly their own capital and credit to fund their ventures (Storey 2016). Entrepreneurs love to take risks even if it means they might lose everything, while small business owners keep a close eye on their finances and avoid taking any significant risks. From this, a small business owner may also be an entrepreneur, while in other cases they are not.
References
Hillman, R. W. (2005). The Bargain in the Firm: Partnership Law, Corporate Law, and Private Ordering Within Closely-Held Business Associations. U. Ill. L. Rev., 171.
Marks, G. (2012, June 6) “The Difference Between An Entrepreneur And A Small Business Owner.” Retrieved from https://www.forbes.com/sites/quickerbettertech/2012/06/06/the-difference-between-an-entrepreneur-and-a-small-business-owner/#6167db416635Neville, A. (2013, June 7) “Five Clauses Every Partnership Needs”. Retrieved from https://www.forbes.com/sites/amandaneville/2013/06/07/five-clauses-every-partnership-agreement-needs/#78736fd375cdStorey, D. J. (2016). Understanding the small business sector. Routledge.
EXAMINATION 1
EXAMINATION 1
Name:
Institutional Affiliation:
Chapter One
This century the United States has bailed out certain industries and companies; such as insurance, banking and part of the auto industry. Some said that this changed our society from a capitalistic society into a socialist society. Please write a 1 ½ to 2 page paper discussing this.Capitalism is defined as a system of government in which the means of production such as land and capital are owned privately, while socialism refers to a system of government in which the means of production are publicly owned. In capitalistic systems, each individual works towards accumulating more wealth for themselves while under socialism, the entire country works to accumulate collective wealth that is then distributed among the citizens. Capitalism is mainly an individualistic system because each person works towards benefiting themselves, while socialism encouraged fairness and equality in society (Schumpeter 2010). Socialism encourages people to work for the collective benefit of their society.
The role of government in the two forms of government are quite different. In a socialist system, the government oversees all aspects of the economic and political activities in the country. However, capitalistic systems are different because they are based on the concept of free-markets. Free markets mean that the market equilibrium determines the distribution of resources. The market always comes back to equilibrium, and this is the best way to handle the economy of the country. However, the government plays a major role in other areas such as money supply, law and order, and national defense (Xu 2017). The government in a capitalistic country regulates the money in circulation using fiscal and monetary policies. An oversupply of money can cause inflation, and undersupply also comes with challenges. The government administers different policies depending on the situation at hand to optimize the money supply as per the needs of the economy. The government also steps in to regulate large corporations and monopolies to ensure free and fair competition in the market. Additionally, the government operates and maintains public utilities such as infrastructure, education, and medical care which are a vital part of the economy. The government also protects the freedoms of individuals and ensures that justice prevails in the country.
The United States is a capitalistic society. The economy of the country is mainly governed by the concept of the free market. In the recent past, the government has bailed out several companies and industries, but this does not make this a socialist society. Sometimes, the free market is not the most efficient, and the government has to step in to ensure that balance is restored. The government also steps in in such cases because some companies and industries provide employment and essential goods and services to the people, and allowing them to collapse would be detrimental to the economy. We are still a capitalistic society because every individual works towards the accumulation of personal wealth, and the government only plays a limited role in the economy. Without the government’s role in the capitalistic economy, chaos would ensue.
Chapter Two
My definition of ethics for a person or Company is doing what you know is right and not doing what you think is wrong. Is this a good definition for individuals? What about Companies. Explain why you think that way. Then conclude with your own definition and what you think of corporate ethics.
Yes, I agree with this definition of ethics. A person must always do what they know to be right and not just act based on suspicions. If one thinks that something might be right, but they are unsure, they should find out before taking any action. Additionally, a person should not do what they think is wrong. An individual always has a sense of right and wrong, and any suspicion that something could be wrong is reason enough not to take any action. This definition of ethics works for both corporations and individuals. For a corporation or company, any improper action taken might lead to severe consequences; hence it must always make sure that any action to be taken is the right thing to do. If the company suspects that an action might be wrong, they should not take it. The company or corporation is made up of individuals; hence, the definition of ethics applies to both parties. I would define corporate ethics as the policies and laws that corporations have put in place to address its functions and processes, as well as any controversial areas. Sometimes employees of a corporation are unsure of what to do or how to do it, and the ethics of the company will guide them in making a decision. Corporate ethics is an important part of the corporation or company because it outlines the beliefs, values, and standards that regulate the operations of the corporation.
Chapter Three
Do a search of the phrase Think Globally, Act Locally using an internet search engine. I amnot talking about this phrase as it is used by environmentalists, but rather by business.Then write summary of what this means
Think Globally, Act Locally is a popular phrase in the business world, especially in the case of multinationals or companies thinking of expanding into different areas. Globalization has made it easier for businesses and companies to different markets in various countries. Some of the factors that have encouraged and promoted globalization are technology, trade agreements, and treaties. Many companies have a goal to reach the widest market possible, and this might involve expanding into different countries across the world. This is the meaning of thinking global. The company then has to consider the differences in business factors across different regions such as target markets, prices, production costs, and many others that would influence their business operations (Parnell 2006). Act local means that businesses must tailor their products, services, and operations to suit each market on the local level. For example, a company that produces women’s clothing must consider several factors when setting up business in various locations. Assume that such a company sets up branches in Dubai, Canada, Australia, and South Africa. While the primary business is the sale of women’s clothes and accessories, these will have to be tailored to the locations. For example, the majority of the population in Dubai is Muslim; hence it makes sense to sell clothes suited for them, which are quite different from those to be sold in Canada for example. Businesses and companies have to adapt to local conditions even though they may operate on a global scale. Thinking locally will help the business maximize on the local market, and this will lead to overall profitability in the global network.
References
Parnell, J. (2006). Reassessing the “think global, act local” mandate: evaluation and synthesis. Serbian Journal of Management, 1(1), 21-28.
Schumpeter, J. A. (2010). Capitalism, socialism and democracy. routledge.
Xu, C. (2017). Capitalism and Socialism: A Review of Kornai’s Dynamism, Rivalry, and the Surplus Economy. Journal of Economic Literature, 55(1), 191-208.
Discussion for week 9
Discussion for week 9
Student Learning Objectives: This discussion activity will help you identify and name different types of fallacies authors use.
Read Chapter 6, “Waste on the Menu” from your textbook, American Wasteland.
Identify two examples from the chapter where the author uses a fallacy in his reasoning. Mention what kind of fallacy he uses.
Use this space to post your response.
Also, for full credit, you must respond, in a substantial way, to at least one other person’s post.