Small Business Ownerships – Selecting the Right Techniques for You

Small businesses are privately owned firms, partnerships, or single owners which have fewer employees than a corporation or normal-sized firm and/or lesser annual sales than a normal-sized firm. Small businesses are defined as such in terms of having the ability to apply for federal assistance and qualify for such preferential tax treatment varies according to the country and industry. The following is an introduction to the concepts of economics, business, and small business financing.

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Small Business Ownerships – Selecting the Right Techniques for You

Small businesses are privately owned firms, partnerships, or single owners which have fewer employees than a corporation or normal-sized firm and/or lesser annual sales than a normal-sized firm. Small businesses are defined as such in terms of having the ability to apply for federal assistance and qualify for such preferential tax treatment varies according to the country and industry. The following is an introduction to the concepts of economics, business, and small business financing.

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The concepts of economics are used in all economic activity. Economics refers to the study of how people, firms, and institutions make decisions concerning how to maximize their profits, spend their money, and allocate resources so as to achieve a goal of maximum output with the smallest input. In the context of small business finance, the study of economics is further subdivided into two key areas: micro and macro. Microeconomics considers the details of a particular transaction-the supply and demand of a product or service, for instance, with an attempt to identify the factors that influence the success or failure of such a transaction. Macroeconomics refers to the analysis of broad national issues such as the status of the U.S. economy, interest rates, inflation, unemployment, and global trade. Both micro and macro economics are essential components of business financing.

Many small businesses begin on just one premise, either through invention or necessities (like the manufacture of certain types of food products); startup finance is necessary to launch a new enterprise. Startup capital is a term that can apply to any business, but is especially relevant for small businesses that have little existing equity and rely on credit scores and other collateral to guarantee a loan. A number of sources from which to obtain startup finance can be found on the web; many lenders will work with small businesses that have good credit scores, so do not hesitate to use them.

Home based small businesses have a number of options available to them when it comes to finance. Most home based small businesses are not highly technological and therefore are not highly leveraged by finance companies. However, in recent years technology has advanced such that certain types of small businesses can now function well without collateral, which enables them to be perfect for startup finance. Home based small businesses often provide a valuable service (like child care, cleaning services, etc) that can bring in a regular income. Such home based businesses usually do not need much in the way of start up capital, but could benefit from access to a loan should they need to hire employees, buy office furniture, or purchase equipment for specific purposes.

Another alternative for home based small businesses is self-employment. Self-employment can be defined as having a regular work schedule and earning an income without being formally employed by someone else. This option is sometimes more appropriate for home based businesses that offer specialized services such as child care or cleaning services, because employees are not required to report to someone else on a daily or weekly basis. Self-employed individuals may also be able to negotiate a lower tax rate due to deductions and credits. The downside is that self-employment usually requires more time and energy to set up and can also involve more paperwork.

Entrepreneurship represents another approach to small business ownership, more common among young people. Entrepreneurship involves buying a small business from someone else, using the proceeds to pay personal expenses and then using the profits to expand the business. The profit obtained from entrepreneurship can either be kept by the company or given to employees or investors. The best approach for many would be to give the profits to employees or investors; however, some entrepreneurs have chosen to keep the profits themselves. Either way, this type of small business ownership is not recommended for people who lack a plan to put their profits to good use.

As previously mentioned, there are many different techniques available to small businesses. The key to being able to select the right technique or combination of techniques is to understand your strengths, weaknesses, desires and needs as well as the financial resources you have available to you. Once you have identified these needs and wants, you should then begin to research the different techniques available. In most cases, you will find that all but one or two techniques will be sufficient for your purposes.

Some of the more common techniques include: franchising (i.e. purchasing a franchise to open a small business similar to an already existing business), startup investment, self-employment (i.e. selling your skills and services that you are knowledgeable about to someone else), and angel investment (paying a startup fee as an individual). Of course, there are many other techniques available, depending on the size and financial resources of the business.

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