Textbook Notes (369,067)
Canada (162,366)
RSM100Y1 (431)
Chapter 5

RSM100 Chapter5,16

4 Pages
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Department
Rotman Commerce
Course Code
RSM100Y1
Professor
Khan, Michael

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RSM100-­‐John_Oesch-­‐textbook_notes-­‐created-­‐by-­‐lavender.y   Chapter  5  Forms  of  Business  Ownership  and  Organization   5.1  Small  vs.  Large  Business   • Small  business:  An  independent  business  with  fewer  than  100  employees  and  revenues   less  than  $2  million   • Industries:  non-­‐institutional  health  care,  construction,  accommodation,  food,  forestry   • Home-­‐based  business:       ü Pros:   more   control   over   business   and   personal   time,   easier   to   run   (Internet   &   advanced  technology),  less  cost,     ü Cons:  less  visibility  to  customers   5.2  Contributions  of  small  business  to  the  Economy   • Creating  new  jobs   • Creating  new  industries  (e.g.  Facebook,  online  shopping)   ü New  industries  are  formed  as  SB  shift  focus  to  meet  consumer  interests/preferences   • Innovation  (airplane,  personal  computer,  soft  contact  lenses,  zipper)     5.3  Survival  rate  of  small  business   • First  year  (96%),  third  year  (85%),  fifth  year  (70%)   • Management  shortcomings:   ü Owner  has  to  take  multiple  role  vs.  corporate  hires  experts     ü Solution:  learning  business  principles,  study  its  industry,  developing  interpersonal   skills,  understanding  its  limitations,  hiring  motivated  employees,  asking  professional   advice  on  finance,  regulation,  etc   • Inadequate  financing   ü Resource:  credit  lines,  loans,  vehicles,  leases   ü Solution:  spend  less  on  employees,  marketing,  inventory   • Government  regulation   ü E.g.  filling  papers,  taxes     5.4  Features  of  an  effective  business  plan   • Business  plan:  a  formal  document  that  details  a  company’s  goals,  methods,  standards   • Includes:     ü Executive  summary  that  briefly  answers  5Ws,  H   ü Introduction  that  includes  a  general  statement  lf  the  concept,  purpose,  objectives   ü Financial  /  marketing  section  that  describe  target  market,  marketing  plan,  financial   forecast   ü Resumes  of  principles     • Addressing  issue  (why  important):   ü Company’s  mission,  vision,  uniqueness,     ü Customers,  competition,  financial  evaluation  of  industry   ü Assessment  of  risks     5.5  Funding  opportunities  for  Small  Business   RSM100-­‐John_Oesch-­‐textbook_notes-­‐created-­‐by-­‐lavender.y   • BDC  (business  Development  Bank  of  Canada)   ü Government  agency  that  assist,  counsels,  protects  the  interests  of  small  business   ü Provides  long-­‐term  financial  assistance   • Financial  Assistance  -­‐-­‐-­‐  CSBFP  (Canadian  Small  Business  Financing  Program)   • Business  Incubator   ü Local  program  that  provides  low-­‐cost,  shared  business  facilities     • Private  Investors   ü Venture  capital:  money  invested  in  the  small  business  by  another  business  /  group   of  individuals   • Small-­‐Business  Opportunities  for  Women     5.6  Franchising   • A  contract-­‐based  business  arrangement  between  a  manufacturer  and  a  dealer   • Franchising  agreements:  contract  between  franchisee  and  franchisor   • Franchisee:  individual  /  business  that  buys  the  franchise   • Franchisor:  firm  whose  products  are  sold  by  the  franchisee   • Benefits:   ü (Franchisor)  able  to  expand  a  business  into  new  location  at  lower  costs   ü Quickest  /  least  risky  way  to  become  a  business  owner   • Problems:   ü Franchisee  and  franchisor  are  influenced  by  each  other   ü Franchisor  loses  control   ü Franchisee  has  many  cash  expense     5.7  Three  Main  Legal  forms  of  Business  Ownership   • Sole  proprietorships   ü Sole  proprietor’s  status  as  an  individual  is  not  legally  separate  from  his  status  as  a   business  owner   ü Pros:  easy  to  form  /  dissolve;  management  flexibility;  right  to  all  profits;     ü Cons:   unlimited   financial   liability;   handle   a   wide   range   of   management   and   operational  tasks   • Partnership   ü Association  of  two+  persons  who  operate  a  business  as  co-­‐owners  by  voluntary  legal   agreement   ü Pros:  easy  to  form;  various  skills;     ü Cons:  unlimited  financial  liability;  hard  to  dissolve;     • Corporation   ü Legal  organization  that  has  assets  and  liabilities  separate  from  owner’s     ü Pros:  limited  financial  risk;  limited  legal  risk;  more  access  funding;   ü Cons:  double  taxation  (federal  and  provincial  income  taxes,  owner’s  personal  tax)   ü Non-­‐for-­‐Profit  Corporations   Ø Whose  goals  do  not  include  pursuing  a  profit   RSM100-­‐John_Oesch-­‐textbook_n
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