Production and supply involves different goods and services {business types}.
factors
Businesses must have capital supply, buy labor and resources, and produce output. Businesses have expenses for investment, labor, resources, land, capital, interest payments, and taxes. Businesses receive revenue for production-unit output. Businesses hope to have positive difference between revenue and costs. Profit provides incentive for owners to have business, satisfies owners' desire for reward, and provides money for capital.
large businesses
Large businesses have resulted from several factors. Technical developments require large plants. Computers and business theory aid management. Mergers eliminate competition and inefficiencies. Financiers encourage mergers and bigness. Expensive advertising requires large budgets. Complex and expensive patent laws require large legal staffs. Strong unions balance big companies.
large retailer {chain store}|.
Business can obtain exclusive right {concession}| to sell product or service in political region.
Business can be local branches {franchise} of a regional business. Business {franchisee} can buy right to sell product or service {franchising}| from company {franchiser}.
franchiser
Franchiser can license franchisee to sell product or service and provide training, advertising, communications, and operating advice or techniques {business format franchise}, such as for fast-food restaurants and convenience stores. Franchiser can sell franchisee trademarked or brand-name products or services {product franchise} {trade name franchise}, such as for beer distributors and car dealerships.
franchise
Established franchises have market for the product; assist with financing, training, advertising and promotion; and provide business model.
franchise: value
Limiting competition, typically by licensing, makes franchise value increase.
franchisee
Franchisees typically have higher income sooner but have higher starting costs and pay franchise fees, royalties, or gross-sales percentage. Franchisees must follow franchiser rules. Franchisees evaluate their skills and experience and choose the best business. They can have advisory boards, organize financing, evaluate franchises, check markets, and create business plans.
Offices {home office}| in homes need quiet and comfort.
properties
Office is not near kitchen, TV, and other activities. Colors are neutral. Office has windows for fresh air and good furniture. Office has telephone, filing cabinets, bookshelves, computer, Internet modem, printer, fax machine, scanner, copier, adding machine, cell phone, desk lamp, radio, and safe.
effects
Home officers have flexible schedules and no commute. They can deduct home office expenses. There is little risk, because no rent or lease. Working at home can cause friction with spouse or children. There can be many distractions. You work alone. Clients can be worry about home businesses. Zoning laws can prevent home businesses.
Company combinations {merger}| can eliminate competition and inefficiencies. Financiers encourage mergers and bigness.
Businesses {small business} can result from market growth, cheap and widespread transportation, available electric power, substitute availability, invention, low import tariffs, government small-business aid, and anti-monopoly laws.
Businesses {sole proprietorship}| can have one owner {single proprietor}. Sole proprietors are single persons or married couples. Independent contractors and all self-employed people are sole proprietors. USA has 15 million to 20 million sole proprietorships, 80% of all businesses. Sole proprietorship is typically the easiest and fastest way to start business and is the cheapest and most common way to start. Owner, not business, files tax return. Owner must pay estimated income tax, Social Security tax, and Medicare tax quarterly.
People can acquire and operate systems in few steps {turnkey}|.
Business groups {cartel}| can control production and prices.
Businesses {conglomerate, business}| can grow by buying other businesses.
Investment banks {syndicate}| can jointly underwrite company.
Two or more people can start business {partnership}| and share profits and losses. Partners share responsibility for liabilities.
types
In most partnerships {general partnership}, partners have equal involvement in the business and can make contracts and perform all business transactions. Partnerships {limited partnership} can have separate managers and investors, who must register with state securities-regulating agency.
tax
Business does not file tax return. Partners must file, but can assign profits and losses differently. Changing partnership relation typically causes tax liability. Terminating partnership typically causes tax liability for all partners.
Business is sole proprietorship if one person or married couple owns the business, even if family runs the business. Otherwise, it is partnership, limited-liability company, or corporation. Family can form limited partnership {family limited partnership}| (FLP) to minimize estate taxes. For partnership, lowest-income person claims profits.
Businesses {charter} {corporation}| can be legal entities allowed by states and have ownership shares.
profit
Corporation profits go to stockholders. Corporations can use profits to pay dividends {earnings per share} or to expand capital.
startup
Writing incorporation articles and bylaws and applying to state cause higher costs for forming corporations. Corporations pay annual fee to state.
taxes
Owners do not file tax returns and have no personal liability. Profit-making corporations can be C or S corporations.
Corporations can pay profits to stockholders. Company reports profit per stock share {dividend, stock}|.
Stockholders are responsible for corporation debt only up to stock value {limited liability}|.
Corporations {C corporation} can file tax returns. Owners are employees and do not file. Small C corporations typically do not pay taxes, because profits are for inventory or growth.
Some corporations {close corporation}| do not trade stocks.
Companies {holding company}| can own other corporations.
Corporations {limited liability company} (llc) can file tax return but not pay taxes. Owners file tax returns but have no personal liability. State typically closely regulates limited liability companies.
Corporations {personal service corporation}| (PSC) {professional corporation} can have license and have close regulation by state. They are only for health, law, engineering, accounting, actuarial science, performing arts, and consulting professionals, who cannot otherwise incorporate. Personal service corporations file tax returns. Owners do not file tax returns but have limited personal liability. Personal service corporations typically have lower taxes because they allow untaxed fringe benefits.
Owners can file tax returns, not their corporations {S corporation}. Owners have individual tax rates. Owners assign profits and losses. Profits cannot be for inventory or growth. S corporations are typically good for businesses that expect to lose money during first years, because owners can report losses on tax returns.
Corporations issue ownership certificates {preferred stock}| that have first rights to profits and repayment.
Corporations issue ownership certificates {share}| {common stock, share} for percentage of corporation, to get money to start, expand, or pay expenses.
Businesses {retail, business}| can sell goods to consumers.
Businesses {wholesale, business}| can sell goods to distributors.
6-Economics-Microeconomics-Business
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Date Modified: 2022.0225