Page 143 - Business Principles and Management

C HAPTER 5 A SSESSMENT

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CHAPTER CONCEPTS

• Most small businesses begin with one or a few owners. Characteris-
tics that help assure these entrepreneurs’ success include the strong
need to be boss, to make their own decisions, and to take reason-
able risks. To aid their success, they must prepare a business plan.

• A sole proprietorship, or proprietorship, is a business owned and oper-
ated by one person. Many small retail and service businesses are single-
owner firms because they are the easiest to start. Other advantages
include the power to make all decisions, receive all profits, pay less in
taxes than corporations, and know employees and customers personally.
• Proprietorships have a few disadvantages, such as lacking skills or
knowledge needed to perform all key business tasks, lacking funds
for expansion, surviving major financial losses, and closing should
illness or death occur.
• A partnership is a business owned by two or more people. Key advan-
tages over sole proprietorships are that multiple owners can contribute
more skills and capital to start or expand, can obtain more credit from
banks and other sources, are in a better position to compete, and need
not close because of an owner’s retirement.
• Partnerships have several disadvantages. Each partner has unlimited
financial liability for all business debts and is responsible for con-
tracts made by other partners. Other problems can arise when a
partnership breaks up, decides how to divide profits, or lacks the
capital needed to expand.

• Some partnerships have limited partners who do not participate in
running a business and have limited liability. However, one or more
members of a partnership must be an ordinary (general) partner with
unlimited liability.

REVIEW TERMS AND CONCEPTS

a. business plan Write the letter of the term that matches each definition. Some terms will
b. creditors not be used.
c. intrapreneur
d. limited partnership 1. When each partner is personally liable for all the debts incurred by
e. partnership the partnership
f. proprietor 2. Written document that describes the nature of the business, the
g. proprietorship company’s goals and objectives, and how they will be achieved
h. Small Business 3. Those who have first claim against a business’s assets
Administration (SBA) 4. Business owned by two or more people
i. Small Business 5. Type of business in which a partner’s liability is limited to the
Development amount of his or her investment
Centers (SBDC)
j. sole proprietorship 6. Person who owns and manages the business and often performs the
k. unlimited financial day-to-day tasks, with the help of hired employees
liability 7. Business owned and managed by one person
8. Government-supported agency that counsels, assists, and protects
the interests of small businesses

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