Chapter 4/5 MiC Flashcards
What are some of the main problems faced by entrepreneurs? I.e. Why do many businesses fail? (4 marks) … see page 69, Made in Canada
Businesses may fail due to the personal characteristics of entrepreneurs:
- They are not willing to devote the immense amount of time and effort that is required of them
- Don’t know enough about the business and how to run it
- Failed to create a sufficient financial plan for the business in order to determine its ability to make a profit
- They may fail to understand the market in which they are selling their goods and services
Or from competition from other businesses, prices may be too high, the market could be too small/big, and businesses also may take months or years to build a sufficient number of customers.
What is an “industrial incubator,” such as the Venture Center in Toronto, and in what ways do they help new/inexperienced entrepreneurs overcome the problems that can cause a business to fail? (5 marks) …pages 69-70, Made in Canada
- It is a response to the high rate of failure among newly established businesses. The Venture Centre provides a favorable environment where new businesses can grow. They have increased public awareness of small business opportunities.
- They help in multiple ways: low rent - during the first 2 years the venture center provides space for the business at 25% of industrial spaces. The next year it’s 50%, and the next it’s 75%, then the 5th year it’s 110%. Development officers - guide and assist entrepreneurs (financing, revisions, establishing cash flow forecasts) Cost sharing of services - businesses share common costs (secretarial, photocopying, etc.) Business advisory committee- lawyer, banker, accountant
Explain what a franchise is, give an example of a franchise, and list at least three industries that typically have franchises. (5 marks) … pages 72-74, Made in Canada
A franchise is a business arrangement where one party (the franchisor) grants another party (the franchisee) the right to use its trademark, brand, and business model in exchange for certain fees and royalties. The franchisee operates under the established brand name and business system of the franchisor, following specific guidelines and standards set by the franchisor.
Three industries that typically have franchises include:
Fast food: Examples include McDonald’s, Subway, and KFC.
Retail: Examples include 7-Eleven, The UPS Store, and Ace Hardware.
Hospitality: Examples include Marriott International, Hilton Worldwide, and Holiday Inn.
Describe one advantage that a private enterprise has over a crown corporation and one advantage that a crown corporation has over a private enterprise (for consumers in society). (2 marks) … page 106, Made in Canada
The private sector is made up of businesses or corporations owned by people, this has lots of competition so they have to compete for the consumer’s dollars so they must have a reasonable price and good service. In a crown corporation, it is not supported by profits so it is paid for by tax dollars no matter how much or little we use them. This makes sense for firefighters or police officers, but for goods and services, this is bad for quality and efficiency. However, the public sector allows people in remote areas to get the goods and services they might not have had otherwise as those places are less profitable.
What is a sole proprietorship business?
A sole proprietorship is a business with a single owner who is solely responsible for all liabilities. In the eyes of legal and tax authorities, the business and the operator are the same.
What is a Corporation business?
A corporation is a legally established business that can own assets and incur debt. Incorporating affects your business’s operational, accounting, tax, and legal requirements. Because it is defined by law, a corporation can technically exist forever. This means that if the owner dies, the company can continue as an operating entity—unlike in partnerships or sole proprietorships where company assets may be tied up in estate and taxation issues.
What is a partnership business?
A general partnership is a business established by two or more owners. It is the default business structure for multiple owners the same way that a sole proprietorship is the default for solo entrepreneurs.
What is a Co-operative business?
Cooperatives are businesses owned by “member-owners”. Co-ops are democratically controlled by their member-owners, and unlike a traditional business, each member gets a voice in how the business is run. Services or goods provided by the co-op benefit and serve the member-owners.
What is a franchise?
With a franchise, a company licences its processes, intellectual property (e.g., trademarks), trade secrets and proprietary knowledge to an entrepreneur for a one-time fee and ongoing annual royalties.
What is a franchisor?
The business that originally developed the products, services, and proprietary knowledge being licensed is called the franchisor.
What is a franchisee?
An entrepreneur who buys a franchise is called a franchisee.
Pros/Cons/Examples of a Sole Proprietorship:
Pros:
easy to establish
no general laws governing the establishment of a proprietorship
Each province has its own regulations
you make all the decisions
collect all profits(entrepreneur)
least regulated
all income taxed as personal
most common type of business
Cons:
The size of the operation is limited by the proprietor’s financial resources and their ability to borrow money.
Have to oversee every part of the operation and have to do a lot
Unlimited personal liability
Limited lifespan
Difficult to transfer ownership
Example:
lemonade stand
lawn cutting business
hotdog stand
dropshipping from Amazon
Pros/Cons/Examples of a Partnership:
Pros:
simple and inexpensive to form
owners share profits
income taxed as personal
Cons:
unlimited liability
the limited life of a business
difficult to transfer ownership
Examples:
Abbotsford hospital and cancer center
Airbnb and Flipboard
Pros/Cons/Examples of a Corporation:
Pros:
Public ownership
limited liability
ease of transferring ownership
unlimited life of a business
ease in raising cash/equity
Cons:
Strict regulations
can be difficult/expensive to form
income subject to double taxation (income tax is different for people and corporations, business and income are taxed)
Examples:
(Can Buy stock)
Walmart
Costco
Tesla
Amazon
Pros/Cons/Examples of Co-operatives:
Pros:
The democratic and patronage dividend acts as a magnet to people, making them loyal members
each member gets the same voting rights
higher quality service
Cons:
difficulty in remaining competitive with private firms
hard to hire and work with aggressive manners without losing the ideals they’re founded on
can’t shop there unless you buy from there
Examples:
Vancity
MEC
Coast Capital Saving
Pros/Cons/Examples of Franchises:
Pros:
Business assistance
brand recognition
legal protection
Cons:
limited creative opportunities
lack of control
lack of financial privacy
Examples:
Mcdonalds
Subway
KFC
What is a crown corporation? Give some examples, including one from your province.
“Crown corporations are peculiar hybrid entities — somewhere between a government body and a private enterprise. They are wholly owned by the state but operate at arm’s length from the government. “ - An example is BC Hydro, BC Transit, BC Liquor
A company that the government runs
- How does a cooperative such as Alberta Wheat Pool or Vancouver City Savings Credit Union differ from a corporation?
In a cooperative, the members are also owners and each of them has the same amount of votes regardless of the amount of shares they own, whereas in a corporation you have as many votes per share you own.
Cooperatives also strive for equity and service within the members and company, however, corporations’ main goals are profit-based.
- How do Crown corporations differ from corporations?
Crown corporations are owned and controlled by some level of government and corporations are owned and controlled by private individuals.
- What are the common characteristics of the firms listed under each type of business organization?
All have an owner or founder
have some sort of liability
businesses
All of these businesses have a presence in the market and have some aspect of risk tied to them.
- What is the major difference between sole proprietorships and partnerships?
Sole proprietorships are owned by one person and partnerships are owned by 2 or more people.
- In what ways are sole proprietorships and partnerships similar?
They are both easy to form and have lots of liability, also they gain a lot if not all of the profits they earn. They are also for entrepreneurs but one is with 2 entrepreneurs and the other is with one.
- In what ways do corporations differ from sole proprietorships and partnerships? In what ways are they the same?
A sole proprietorship has one owner who has unlimited liability for the business. A partnership involves two or more people who combine resources for the business and share profits and losses. A corporation is considered to be a separate legal entity from its shareholders. Corporations are also easier to transfer over as shares are easily transmissible, however sole proprietorship and partnership die when the owner dies. However, some ways that these are the same are the way they operate with efficient business on the top of their mind and lots of competition.
- In what ways do public enterprises and cooperatives differ from corporations?
Corporations, public enterprises, and cooperatives all want to succeed in their industry, but they differ greatly in terms of ownership, goals, governance, and distribution of profits. Corporations are owned by shareholders and motivated by profit, while public enterprises are owned by the government and serve the public interest. Cooperatives are member-owned organizations that prioritize mutual benefit.
What type of company is it where: The owner receives all of the profits and is responsible for all debts.
Sole proprietor
What type of company is it where: Operated by two or more people who share costs and responsibilities.
Partnership
