Options for Organizing Small and Large Businesses

08. Jan, 2011

Options for Organizing Small and Large Businesses

Most Businesses are Small Businesses

•      90% of firms with employees have fewer than 20 people on staff.

–    98% have fewer than 100 employees.

•      More than 20 million people in the United States earn business income without employees.

–    Almost ½ the sales in the United States are made by small business.

•      Small businesses generate 60% – 80% of new jobs over the last decade.

•      Launching pad for entrepreneurs and prevalence of minorities.

•      The Small Business Administration defines a small business to be a firm that is independently owned and operated and is not dominant in the field.

–    Manufacturing business: fewer than 500 workers

–    Wholesalers: fewer than 100 workers

–    Retailers: less than $6 million in annual sales

–    Agricultural business: less than $750,000

•      Small Businesses size ranges from $500,000 to $25 million in sales and from 100 to 1,500 employees.

Creating New Jobs

ü Creating New Industries

ü Innovation

ü Management Shortcomings

ü Inadequate Financing

ü Government Regulation

•      Creating a Business Plan

–  Written documentation that provides orderly statement of goals, methods, and purpose.

•      Small Business Administration

–  Government agency concerned with helping small business firms.

•      Financial Assistance

–   Loan Guarantees

–   Microloans

•      Small Business Investment Companies (SBICs)

•      Active Capital

•      Set-aside Programs

–  Government Contracts (over 23%)

•   5% for women and minorities

–  Assistance in Financing Government Procurement

•      Business Incubators

–  Local community initiatives to share resources for small start-ups

•   The University of Tennessee

•      More than 50% of U.S. businesses are owned by women

•      The number of businesses owned by minorities outpaced the growth in the number of U.S. businesses overall

•      Women and minorities still face challenges

–    Smaller scale operations

–    Challenges finding investors

–    Access to capital

Advantages

–   Prior Performance Record

–   Recognizable Company Name

–   Prove Business Model

–   Tested Management program

ü     Financial Situation

ü     Management Skills and Limitations

ü     Management Styles and Capabilities

ü     Exposure to Liability

•      Domestic Corporation

•      Foreign Corporation

•      Alien Corporation

•      Employee-Owned Corporations

•      Not-for-Profit Corporations

•      Stockholders – acquire stocks in exchange for ownership.

–    Preferred Stock

–    Common Stock

•      Board of Directors – elected by stockholders to oversee corporation.

•      Corporate Officers & Management – make major corporate decisions and handle ongoing operations.

•      Mergers and Acquisitions (M&A)

–   Merger – combination of two or more firms to form one company.

•    Vertical

•    Horizontal

•    Conglomerate

–   Acquisition – procedure in which one firm purchases the property and assumes the obligations of another.

•      Joint Ventures – partnership between companies for a specific purpose

You are here: Introduction to Business Options for Organizing Small and Large Businesses

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