OL 110's Chapter 5 notes.
I did not copy and paste, it is my own interpretation. It does not include the thing about franchise and how-to-succeed-if-you-have-a-small-business thing. Remember that an essay question is coming out from this chapter.
What is a small business (SB)?
In the United States, a small business in the manufacturing industry has less than 500 employess. Businesses can earn up to US$6 million per year and be considered a small business. However, in the agricultural industry, you can only earn below US$ 750,000 per year.
Among the contributions of small businesses to the economy are...
1. Creating new jobs.
Did you know that in the US, 3 out of 4 new jobs which are created every year are by companies with less than 500 employees?
Small businesses are also known to hire welfare receipients as workers, thus lowering the unemployment rate. Besides that, most SBs are located at less developed areas of the town, where the unemployment rate is high.
2. Creating new industries.
Google, Yahoo! and Dell all started as small businesses. When these grew bigger, they created a whole new industry on its own.
Most SBs are started to adapt to consumer shifts in preferences, etc. They exist because a need or want for it does.
3. Innovation
Generally, SBs tend to develop better and newer goods and servicescompared to large businesses.
Why SBs fail
1. Management Shortcomings
Large firms are able to recruit specialists in many departments while small businesses do not have the capability to do so. So, the small staff is relyed upon to adept to various skills. Plus, most SB owners start without business training.
2. Inadequate Financing
SBs get their financing from bank loans, line of credit, trade credit (where the supplier supplies you materials and you don't have to pay until a certain amount of time) and even personal credit cards. Without enough fund, ventures may sink.
It is necessary for SBs to realize the importance of a cash reserve-because most SBs, like florists, may face uneven cash flow during their course of work. Flowers may be in high demand on Valentines and Mother's Day, but low at others. They need cash reserve to be able to sustain themselves.
3. Government Regulations
There is excessive government regulation and red tape for SB owners to go through. Paperwork itself costs billions among SBs.
While large firms are able to hire specialists, SBs have to struggle as they have limited staff and budget.
There are local, state and federal income taxes to pay as well, not to mention employee benefits. However, SBs are exempt from several Acts.
Sole Propriertorship, Partnership, Corporation
Advantages and Disadvantages
SP- Easy to form and dissolve. All profits after taxes are retained by owner. However, this lacks continuity and the liability is faced personally.
What is a small business (SB)?
In the United States, a small business in the manufacturing industry has less than 500 employess. Businesses can earn up to US$6 million per year and be considered a small business. However, in the agricultural industry, you can only earn below US$ 750,000 per year.
Among the contributions of small businesses to the economy are...
1. Creating new jobs.
Did you know that in the US, 3 out of 4 new jobs which are created every year are by companies with less than 500 employees?
Small businesses are also known to hire welfare receipients as workers, thus lowering the unemployment rate. Besides that, most SBs are located at less developed areas of the town, where the unemployment rate is high.
2. Creating new industries.
Google, Yahoo! and Dell all started as small businesses. When these grew bigger, they created a whole new industry on its own.
Most SBs are started to adapt to consumer shifts in preferences, etc. They exist because a need or want for it does.
3. Innovation
Generally, SBs tend to develop better and newer goods and servicescompared to large businesses.
Why SBs fail
1. Management Shortcomings
Large firms are able to recruit specialists in many departments while small businesses do not have the capability to do so. So, the small staff is relyed upon to adept to various skills. Plus, most SB owners start without business training.
2. Inadequate Financing
SBs get their financing from bank loans, line of credit, trade credit (where the supplier supplies you materials and you don't have to pay until a certain amount of time) and even personal credit cards. Without enough fund, ventures may sink.
It is necessary for SBs to realize the importance of a cash reserve-because most SBs, like florists, may face uneven cash flow during their course of work. Flowers may be in high demand on Valentines and Mother's Day, but low at others. They need cash reserve to be able to sustain themselves.
3. Government Regulations
There is excessive government regulation and red tape for SB owners to go through. Paperwork itself costs billions among SBs.
While large firms are able to hire specialists, SBs have to struggle as they have limited staff and budget.
There are local, state and federal income taxes to pay as well, not to mention employee benefits. However, SBs are exempt from several Acts.
Sole Propriertorship, Partnership, Corporation
Advantages and Disadvantages
SP- Easy to form and dissolve. All profits after taxes are retained by owner. However, this lacks continuity and the liability is faced personally.
P-Expanded financial capability, as the bank may be more willing to offer loans to two partners. Complementary business skills and knowledge. Partnership is vulnerable to personal conflicts, which may be difficult to solve.
C-Is able to shield owners from both legal and financial risks, obvious financial capabilities as corporations can sell their stock. Besides that, liability is limited. However, this form of business is diffucult to form and dissolve and faces double taxation.
Wah. Last week I got an express mail from The Star. In the envelop was an invitation from Brats to a year-end trip in Sepilok (that's in Sabah or Sarawak). I assumed everyone of the 40+ Brats from Kajang would get it-but the email that I just received from them had only 15 email addresses in the receipient bar. Wah. Again.
But the flight ticket alone costs like...RM800? And money doesn't grow on trees, you know.
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