
A business is a legal entity that is set-up
or designed to make goods, sell goods,
or provide a service.

Businesses fulfill the needs and wants of consumers.
› Needs – Things necessary for existence
› Wants – Things that are not necessary for existence but are
nice to have
› Consumers use goods and services
› Customers purchase goods and services

Businesses make or sell goods, provide services or do both for
consumers/customers
› Goods – items that can be physically weighed or measured.
Tangible=touchable (Ex. clothing, cars, computers)
› Services – actions or activities performed by a business for a
consumer. Intangible=can’t be touched (Ex. dry cleaning,
lawn care, babysitting)

Profit motive - desire to make money; see the opportunity
to make money in the marketplace.

Opportunity to meet wants and needs of consumers

Opportunity to increase competition in the marketplace

Businesses are investment opportunities for individuals—
future income

Main goal is making a profit (earning more revenue than
expenses)

Produce and distribute goods and services based on consumer
demand or desire

Examples
› Apple Computer
› Sony
› Domino’s Pizza
› The Gap

Can earn a profit, but its main goal is to help people, animals or the
environment

Cannot be run for the financial gain of the members or directors

Donors’ Contributions are tax deductible

Examples
› American Red Cross
› Salvation Army
› Meals on Wheels
› Homeless Shelters
› St. Jude’s Children’s Hospital

Sell goods to individual consumers/customers and to other
businesses

Retailers/stores and distributors are product businesses

Examples
› Old Navy
› CD Stores
› Best Buy
› Dick’s Sporting Goods

Provide services rather than goods

Some service businesses meet needs (medical clinics, law firms)

Some service businesses provide wants (taxi companies, ISPs)

Examples
› Barber shop
› Dry Cleaners
› Copy and Print Shops (Kinko’s)
› Car repair shops

Some businesses are both good and service businesses—
they sell a good and provide a service.

Examples
› Automobile dealerships
› Hair salons
› Appliance stores
› Can you think of others?

Owned by one person

Examples
› Floral shops
› Bookstores
› Farms

Advantages
› Easy to start
› Owner is his/her own boss
› Owner keeps all profits

Disadvantages
› Owner must pay for
everything needed for the
business
› Difficult to obtain capital
needed to start
› Owner might lack business
skills
› Unlimited liability—owner
has full responsibility for
company’s debts and can
lose entire investment as
well as personal assets

Owned by two or more
people

Examples
› Law firms
› Medical practices
› Auto Body Repair

Advantages
› Relatively easy to start
› Easier to obtain capital
than in a sole
proprietorship
› Partners share skills and
talents
› Partners share risks

Disadvantages
› Partnership agreement is
needed to start
› Partners might not get
along well
› Partners must share profits
› Partnership must be
reorganized if one partner
quits
› Partners share unlimited
liability—all partners share
the responsibility of a bad
decision made by one
partner (including debts)



Owned by many people called
stockholders, but treated by
law as one person (can own
property, pay taxes, make
contracts)
Examples
› Nike
› Facebook
› Google
Advantages
› Corporations can raise
money by selling stock
› Limited liability—stockholders
can only lose what they
have invested
› Corporation continues when
stockholders sell stock
› Corporation can always
make money by selling more
stock

Disadvantages
› Corporations are taxed
on their profits
› Government closely
regulates corporation
› More difficult to start a
corporation
› Must obtain a corporate
charter from the state in
which headquarters is
located

Franchise is a contractual
agreement to sell a company’s
products or services in a
specific geographic area

Examples
› Taco Bell
› Blockbuster
› McDonald’s

Advantages
› Easy to start
› Franchisee can rely on
good name and expertise
of the parent company
› Franchisee can get needed
guidance in operating the
business from franchisor

Disadvantages
› Some franchisors are strict
about how the business is
run
› Franchise is limited in what
products or services can
be sold
› Franchise must operate
like every other franchise

Accounting - recording and reporting financial activity and transactions

Management - the process of using available resources to effectively
work with people and meet organizational goals.

Marketing - satisfies the needs and wants of consumers through
exchange. Based on the
4 P’s (product, price, place, promotion)

Information Technology – the use of technology to share knowledge,
facts, and data to others

Operations - involves behind the scenes paperwork required to
complete all transactions

Human Resources - manages “people” relations within the company;
such as training, hiring and firing of workers.