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 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
• 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
– 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.
– Acquisition – procedure in which one firm purchases the property and assumes the obligations of another.
• Joint Ventures – partnership between companies for a specific purpose