· Understand the types of business ownership: sole proprietorship,

partnership, LLC, “C” Corp

A sole proprietorship is a business owned and operated by one person

Advantages of a sole proprietorship include:

It’s easy to start and end the business.

You’re your own boss and make all the decisions.

There’s a sense of pride in ownership.

You can leave the business as a legacy.

You keep all the profits.

There are no special business taxes.

Disadvantages include:

You are personally responsible for all debts (unlimited liability).

There are limited financial resources.

It can be hard to attract skilled employees.

requires a significant time commitment.

limited potential for growth.

existence is tied to the owner’s life span.

LLC:
Advantages:

● Limited liability (owners are not personally responsible for the

company’s debts or liabilities); if the LLC faces financial troubles or
legal claims, members’ personal assets – like their homes, savings
– are personally protected; members only risk the money they
invested in the LLC
● Tax choice: corp vs partnership (LLC’s can choose to be taxed as a
sole proprietorship, partnership, or corporation, depending on
what benefit them the most)
● Flexible ownership rules (can have unlimited members)
 ● Flexible loss and profit distribution (profits and loss can be split
however the owners’ agree)
● Operating flexibility (few rules than corporations e.g. no need for
board directors, shareholder meetings, members have freedom to
run the business in a way that best works for them)
Disadvantages:
No stocks
Fewer incentives
Income taxes at individual level
Pass-through entity (the llc itself is not tax, owner needs to pay
taxes on profits)
Paperwork (needs more paperwork compared to sole
proprietorship
C-corporation
Advantages:
-More money for investment (can sell stocks to investors)
Limited liability (not responsible for company’s debt, protect their
personal assets)
Separation of ownership and management (owners/shareholders don’t
manage daily operations; professional managers does that)
Ease of ownership changes (shares can be bought or sold, making it easy to
transfer throughout the company)
Perpetual life (can exist even if its owner dies or leaves)
Size (can grow larger and operate at much bigger scale than other business
structures)
Disadvantages:
-Initial cost (expensive to start up)
-Paperwork (must handle extensive documents)
- two tax return (both the corporation and shareholder must file separate
tax return – one for the corporate income and another for individual
income)
-termination difficulty
- stockholder and board conflict
- Double taxation (the company’s money get taxed twice – the corporation
pays taxes on its profits, then if the corporation give some of those profits
to its shareholders as dividends, the shareholder also has to pay taxes on
the dividend it receives)

A partnership is a business owned by two or more people. It offers several

advantages, including access to more financial resources, shared management
responsibilities, a higher likelihood of long-term survival, and the absence of
special taxes. However, there are also disadvantages, such as unlimited liability for
debts, the division of profits, potential conflicts among partners, and the difficulty
of terminating the partnership.

There are two types of partners: one who runs the business and takes on all the
risk (general partner) and others who mostly invest money and aren’t involved in
daily operations (limited partners). The limited partners only risk losing the money
they put in, while the general partner is fully responsible for any debts or
problems.

S corporations

No more than 100 shareholders

Individual or real estate (only individuals or real estates can be shareholders)

Must be U.S. citizen or residents

< 25% of income can be passive to shareholders (only taxed at shareholder level) -
a big portion of s-corp income must come from active business operations ($ that
come from the main work the business does), not passive investments ($ earn
without much effort). Benefit is that taxes are only paid by shareholders, not the
corporation itself.

Slower growing company

Benefit changes with new tax rules

· What is limited liability vs unlimited liability

Limited liability means that business owners or shareholders are not personally
responsible for the company’s debts or financial losses. If the business can’t pay its
debts, the owners only lose what they invested in the company—personal assets
like their home or savings are protected.

Unlimited liability means that business owners are personally responsible for all
the debts and financial obligations of the company. If the business can’t pay its
debts, creditors can go after the owner’s personal assets to cover the losses.

· What are the advantages and disadvantages of each?

· Which is the only one that can do an IPO

C-corp
· Understand franchises- what they offer and what the franchisor
require from franchisees
Franchisor:
-Assigns territory (gives franchisee a specific area to operate in)
-May provide financial aid/advice (might offer loan or expert advice to
help franchisee start and grow their business)
-Provides training and support
- Offers merchandise/supplies at competitive prices
- Business expansion using O.P.M. ( means the franchisor is relying on the
franchisee’s investment (money) to expand their business)
Franchisee:
-Pay up-front costs (initial fee to start the franchise)
-Makes monthly payment to franchisor
- Runs business by franchisor’s rules/procedures
- Buys materials from franchisor/ approved supplier
Advantages:
-Management and marketing assistance (Franchisees gets training,
support, and marketing help from franchisor)
- Personal ownership
-Recognized name
-Financial advice and assistance
-Lower failure rate
Disadvantages:
-High start-up costs
- shared profit between franchisee and franchisor
- Management regulation: franchisee needs to follow strict
rules/guidelines set by the franchisor
-Coattail effect: if other franchisees perform poorly, it can hurt the
reputation of the whole brand
- Restrictions on selling their business
-Fraudulent Franchisor
Nutshell: Franchisors offer training, support, financial advice, recognized
branding, and competitive supplies to franchisees. In return, franchisees
are required to pay upfront fees, ongoing payments, follow the franchisor’s
business rules, and buy materials from approved suppliers/franchisors.
· What is an LBO? What are its characteristics discussed in class
LBO (Leveraged Buyout) is when an individual or group buys a company
using a loan. The goal is to later sell the company for a profit. The
purchased company acts as collateral for the loan, meaning if the buyer
cannot repay the loan, the lender (the one who provided the loan) has the
right to take over the company to recover their money.
· What is a merger
A merger is when two companies come together to form a larger company.
Types:
Vertical: Happens when 2 companies at different levels of the supply
chains within the same industry merges. Ex: Amazon
Horizontal: When 2 companies in the same industry and at the same level
of production combine. Ex: Pfizer - Allergan Merger
Conglomerates: 2 companies from entirely different industries combined.
· What is a conglomerate
When 2 companies from entirely different industries combine.
· What is SWOT When is SWOT used? Did you use SWOT for your
shadowing project?
Strengths, Weaknesses, Opportunities, Threats. SWOT is a continuous
process.
Porter’s Five Force for Competitive Analysis:
1. Industry Rivalry: The level of competition existing among
businesses in the industry
2. Threat of new substitutes: risks of customers switching to new
services/products
3. Threats of new entrants: How easy is it for new companies to enter
the market and compete
4. Bargaining power of suppliers: How much power suppliers have
over prices
 5. Bargaining power of customers: ability of customer to negotiate
for better prices/deals
· What is the difference between Strategic and Tactical planning and
planning horizons
Strategic:
Planning focuses on setting long/broad-term goals and deciding the overall
direction of an organization. It defines the mission, vision, and big-picture
objectives, usually looking ahead 3 to 5 years or more. This type of
planning is done by top-level management and is kept flexible to adapt to
changes and uncertainty. It’s not overly detailed but provides a broad
framework for the organization’s future.
Tactical: usually focuses on specific actions, decisions, and resource
allocation within various departments or units. Planning covers a shorter
time frame, typically 1-3 years. The planning is usually carried out by
Low-level managers. It is a planning that provides a more detailed and
specific guideline for day-to-day operations. Plans are more concrete
Strategic Planning Horizon: Long-term planning horizon, typically 3-5+
years.
Tactical Planning Horizon: Short to medium-term planning horizon, 1-3
years
Strategic planning involves setting broad goals and objectives for the
organization, focusing on long-term success. Tactical planning, on the other
hand, is specific and involves detailed plans to achieve the strategic goals
in the short term.
· What is an organization chart? What is the difference between tall
and flat organizations?

An organizational chart shows the activities of the organization. It highlights the

subdivisions of the organization, identifies different types of work performed.

Tall organizations have many layers of managers, which can make communication
slower and increase costs.

Flat organizations have fewer layers, making decisions faster and encouraging
teamwork.

· How do informal vs formal lines on an organization chart differ

Formal lines show the different levels of management, who is in charge of
whom, and how communication moves through the organization. Informal
lines, on the other hand, reflect the social and collaborative connections
between employees that go beyond official roles.
· What is the span of control? How many subordinates can a manager
have report to him (we discussed this in class)
 Refers to the number of subordinates or employees that a manager
directly supervises. Used to be 12, but now it depends: Capabilities of
Subordinates & Manager; Complexity of Job; Geographically Close
;Functional Similarity; Need for Coordination; Planning Demands
Functional Complexity
Departmentalization by Function
Advantages
Skill Development
Economies of
Scale
Good Coordination
Disadvantages
Lack of Communication
Employees Identify with Department
Slow Response to External Demands
Narrow Specialists
Line Personnel (workers contributing to org)
• Perform Functions
• Contribute Directly to Organizational Goals
Staff Personnel (people who support and advise workers):
• Advise
• Assist Line Personnel
Matrix Organizations (a structure where employees report to two or more managers)
Advantages:
• Flexibility
• Cooperation & Teamwork
• Creativity
• More Efficient Use of Resources
Disadvantages:
• Costly/Complex
• Confusion in Loyalty
• Requires Good Interpersonal Skills & Cooperation
• Not Permanent
Outsourcing(when a company hires another company or outside experts to do tasks or
services instead of doing them themselves):
Benefits:
• Time to focus on company’s primary function
• Increased level of expertise
• Cost effectiveness
• Decreased overhead
• Risk reduction
• Flexibility
 • Technology
Downside:
• Less personal approach
• Less control by owner in planning, implementing & carrying out
company’s future
• Potential for competing for the outsourcing firm’s time
· What is a virtual corporation?

A Virtual Corporation is an organization where the core team focuses on its

strengths and outsources other functions to external experts.

· What do we mean by “inverted pyramid” with respect to an

organization chart?
Employees (front-line workers prioritize first), support personnel
(managers) next to support front-line, and then top management last.
Example: Restaurant
Frontline workers (chefs, waiters, and servers) are prioritized because they
directly serve customers.
Managers provide resources, training, and tools to support frontline
workers.
Top management focuses on creating policies, strategies, and a supportive
culture to help everyone below succeed.
Example: Starbucks
· Know the major points of several “experts’” thoughts related to
generating desired outcomes from employees. These include: Maslow,
Ouchi, Herzberg, and McGregor
Herzberg's theory
(These factors motivate workers and increase job satisfaction.)
• Work itself
• Achievement
• Recognition
• Responsibility
• Growth and advancement
Hygiene (Maintenance) Factors
(These factors prevent dissatisfaction, but they don’t strongly motivate.)
• Company policy and administration
• Supervision
• Working conditions
• Interpersonal relations (co-workers)
• Salary, status, and job security
McGregor
Theory X - Autocratic
 • Dislike Work
• Avoid Responsibility
• Little Ambition
• Force/Control/Direct/Threaten
• Motivated by Fear & Money
Theory Y - Democratic
• Like Work
• Naturally Works Toward Goals
• Seeks Responsibility
• Imaginative, Creative, Clever
• Motivated by Empowerment
Ouchi’s Theory Z
• Long-Term Employment
• Collective Decision-Making
• Individual Responsibility
• Slow Evaluation/Promotion
• Specialized Career Path
• Holistic Concern for Employees
Lines Organization:
Advantages:
• Clear Authority & Responsibility
• Easy to Understand
• One Supervisor per Employee
Disadvantages:
• Inflexible
• Few Specialists for Advice
• Long Line of Communication
• Difficult to Handle Complex Decisions
Centralization (No Delegation)
Advantages:
• Increased Uniformity
• Less Duplication
• Maximum Control
Disadvantages:
• Lots of Policies & Procedures
• Many Layers
• Slower Flow of Information and Decisions
Decentralization (Delegate Authority)
Advantages:
• Informed Decisions
• Worker Responsibility
 • Few Layers / Faster
Disadvantages:
• Loss of Control
• Possible Duplication

Maslow’s Hierarchy of Needs explains that employees are motivated to meet their
needs step by step, starting with basic needs and moving up. The five levels are:

Physiological: Basic needs like food, water, and shelter.

Safety: Feeling secure and protected.

Social: Building relationships and a sense of belonging.

Esteem: Gaining respect and recognition.

Self-actualization: Achieving personal growth and potential.

Motivation comes from the desire to satisfy unmet needs, influenced by internal
drives (like personal goals) and external factors (like a supportive work
environment). Employees feel more satisfied when their needs at any or all levels
are met.

Ouchi’s Theory Z:

What are the four “Rs” for organizational transformation?

●Reframe
●Restructure
●Revitalize
●Renew

· What do we mean by the term MBO as a form of management?

Management by objectives.
MBO stands for Management by Objectives which is a goal setting theory
that was popular in 1960s
○ Employees motivate themselves
○ Help
○ Coach
· Review the four ethics lenses and understand why harassment can’t
be justified by any of them.

Rights: Harassment violates the fundamental rights of individuals to be

treated with dignity, respect, and without discrimination. It infringes on
the rights of the victim to work in a safe and respectful environment.
 ●Relationship: Harassment damages relationships and erodes trust
amongst colleagues. It disrupts positive and collaborative workplace
relationships necessary for a healthy work environment. Harassment is
fundamentally incompatible with the values of empathy, compassion,
and building positive relationships.
●Results: Harassment leads to harmful consequences for individuals
and the workplaces, such as decreased morale, increased stress,
reduced productivity, and potential legal consequences. The overall
impact is negative and detrimental to the well-being of individuals and
the organization.
●Reputation: Harassment runs counter to the responsibilities that
individuals and organizations must create a safe and inclusive work
environment. It violates the duty to treat others with fairness, respect,
and professionalism