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Running head: In the Ring: Small and Large Businesses

In the Ring: Small and Large Businesses Mariel Butler University of North Carolina at Charlotte

2 In the Ring: Small and Large Businesses My Understanding of Business: Throughout most of my life, my understanding of businesses and their role in the economy was very limitedin the smallest way possible. The purpose of this study is to investigate the reciprocal impact of large corporations and small locally owned businesses. By focusing on this, I can point out the distinct differences in business practice/protocol, as well as pointing out the negative aspects of both of these different types of business. Then, after collecting my data, I can hopefully see which style of business is more beneficial to the general public and which one is better suited for a recently recovering economy. While I am the farthest thing from an expert on the matter, I do know how to state my own opinion and pull from my past as reputable support for my ideas. For example, having grown up with a self-employed mother and a father who bounced from car dealership to car dealership, I always understood smaller, more locally owned businesses to be key beneficiaries to the economy. However, growing up, opinions change as well as circumstance. My opinion of smaller businesses was put to the test once my father got a job at GM when I was in high school, around the same time that I got employed as a receptionist at a local hair salon. While I saw the strengths and weaknesses of the larger businesses with my fathers employment, I also noticed the benefits of owning, operating, and being involved in a locally owned business within my experiences at my own job. By addressing the audience of those involved in either large businesses or small businesses or even those merely interested in the matter, I can hopefully provide some insight and even reputable information as to which business style is more beneficial to that of a recuperating economy.

3 In the Ring: Small and Large Businesses Literature Review:

Before someone can stare at listed statistics and point out the pros and cons of each small businesses and large businesses, there are key ideas that must be understood of the businesses. Some ideas, for example, may include the particular type of business structure. The different type of structures include: LLP (limited liability partnership), LLC (limited liability company), and LP (limited partnership.) A limited liability partnership is similar to an LP in that there are two owners who share responsibilities for the business, but can split shared debts between the two of them. While both LLP and LP styled businesses have fairly consistent ideals, an LLC based company has differing regulations depending on the state. Most of LLC companies are either classified as corporations, partnerships, or as a tax return. It is important to keep in mind, however, that regardless of a particular type of structure label, certain businesses may operate differently due to personal protocol. A hair salon is a good example of this. Because so many aspects of business structure are left to choice, the business ownership type a salon uses may not be evident, particularly if it operates as a sole proprietorship or partnership. However, many states feature a searchable database of LLC, LLP and LP registrations on the Secretary of State's website that can help rule out these business types or determine an individual salon's ownership structure (Mott, 2013). A LP is the type of business where there is one general owner who makes business decisions and another who is mostly an investor into the business itself. Each of these titles reflects the particular structure either determined by taxes or by the owners of the business, depending on the type of arrangement they wish to use when dealing with the organizing of their business.

4 In the Ring: Small and Large Businesses The following article goes farther into depth regarding the certain rules and regulations regarding how Limited Liability Companies are filtered and monitored by the government. Limited Liability Companies are classified into different subcategories depending on how they are run by the owners. By learning the specific tax laws that correlate with this business style, I can take into account different types of businesses that are classified as LLCs and determine their success rate when compared to the other types of businesses. This article discusses in depth the smaller details of LP and LLP styled companies and how they deal with legal procedures between partners. A limited partnership is a partnership with two people with one person making the business decisions and the other being the financial support for the business. This relationship, however, allows the financial supplier to not be held responsible for any business debts that come along with the ups and downs of business. A limited liability partnership is very similar to an LP, except there is no main role in the business. Both owners are held with limited liability for any business debts. These different styles for business can be compared with an LLC based company to compare which one is more beneficial in the economy (Limited liability company, 2013). Top-Down Effects: Large Corporate Impact on Small Business If there is one thing that many people can agree on, without any prior knowledge about businesses (small or large) it is that each one often misjudges the other. Most of the time in the business world, larger corporations are more apt to have misconceptions on how smaller businesses run their companies/deal with their clientele. Megalli lists and explains the five most common fallacies that are normally associated within the field. The common misconceptions that are most apparent are as following:

5 In the Ring: Small and Large Businesses 1) Lilliputian Misconception. This misconception harbors the idea that small businesses act like big businesses, when in actuality they are much different. The differences are mainly found in the comparison of cultures, and even behaviors between the two, therefore proving to be valid as one of the delusions that are mainly suggested by larger corporations. 2) Mom and Pop misconception. The misunderstanding here falls where larger corporations believing that smaller businesses act just like consumers do. While even big business owners can be guilty of having similar mannerisms as that of a consumer, many locally owned businesses include owners who take their work incredibly seriously, and take pride in their work as well. This is something that some small businesses may say that large corporations lack: pride in their work. 3) Motivations misconception. This misconception is where most large corporations believe that smaller businesses are only driven by the idea of moving up the success chain. This is simply not true. While businesses growth is important and desired in many cases, most entrepreneurs wish to keep their business on a smaller scale, for optimum management and observation. 4) Algernon misconception. Many larger corporations tend to believe that they hold power to the most clever and strategic ideas of how to better business/cause growth within the company. This is probably the most ironic misconception, seeing as that many locally owned businesses are more than likely just as concrete with their businesses decisions as larger corporations are (Megalli, 2006). Some may even argue that smaller businesses are more delicate to their decision making because their choices directly affect the owners more than big businesses would.

6 In the Ring: Small and Large Businesses 5) Technology Lite misconception. I see this misconception much like how younger people tend to perceive older people with technology. The bigger corporations are the younger generation in this instance, thinking that the smaller businesses arent up to date with their knowledge of technology and most certainly not taking advantage of what it has to offer. This is one of the most false ideas out of all the misconceptions seeing as how many locally owned businesses depend on the use of new and upcoming technology to get word out about their company (Megalli, 2006). While reviewing these misconceptions, one might think that these would potentially hinder the growth and discourage small business owners from further developing their companies. I look at these ideas and see them as a motivation to continue on with the particular pace set by each individual small business owner.

Bottom-Up Effects: Local Business Impact on Large Corporations There are many obvious strengths of local businesses that most consumers, political figures, and even big businesses owners admire. Diaz fights on the principle of how the government needs to put all of its trust and expectations into locally owned companies in order to have a more stable economy. Diaz supports this claim with the argument that these companies will do all they can to stick through the tough times, including declining and threatening economies (which are incredibly prevalent now). He also fights that locally owned businesses supply a concrete income for the local government throughout the country (Diaz, 2013). While statistics and facts are important, its incredibly insightful to view how a

7 In the Ring: Small and Large Businesses business works by firsthand observation. By viewing smaller businesses it is likely to show the deeper connections between employees in this type of setting as opposed to a corporate setting. In my own observations, I was not surprised to see how the smaller, more intimate feel of the business contributed to the overall staff morale and performance of the salon. When asked to describe the community of the salon, the staff responded with: Theyre crazy but fun. A fun, crazy hard-working group of people that I love to work withI feel that we are like sisters in a way where we can get along, and fight and have snarky moments (Butler, 2013). Meredith and Butler agree on the idea that community is key for a successful business, and real genuine community is likely only found in smaller businesses. Merediths article is another one that is primarily rooting for the smaller guysthe underdogs, if you will. By pointing out that the customer is and always is the center of the business world, despite the size of the company, it highlights how smaller businesses tend to cherish this relationship more so than the big guys. Marketing is also put into play, and it is described to show the importance of making the customer feel special, which is mostly more prevalent in smaller businesses as opposed to bigger businesses (Meredith, 2012).

Entering the Conversation: The Recovering Economy and Large Corporation/Small Business Struggle In an economy such as the one America is currently being held under, its hard to tell which structured businesses are fueling the economys recuperation and which are preventing it from rising back up. While neither general large corporation or small business are fully to blame for hindering the regrowth of the economy, surely both have

8 In the Ring: Small and Large Businesses their strengths and weaknesses in the matter. I personally find more positive attributes for smaller, independently owned companies as opposed to larger corporations. While most people would be quick to state this opinion without support, I know now the benefits of locally owned businesses and how well they can contribute to a local government, and in turn, the countrys economy. To be realistic however, both models of business are going to be attacked and scrutinized by everyone to see which model type should be praised for magically fixing the economy. While its impossible for one particular model type to rule out over another, it is possible that one have more pros then cons, such as smaller businesses. People find it hard to like businesses once they grow beyond a certain sizesome wonder that whenever politicians want to laud business they praise cuddly small firms, not giants ("Small is not," 2012). The Economist gives a crucial point in this article that while people like the idea of more backing behind locally owned businesses, it is important that the economy keep hold of larger corporations as well, since they do so much to keep efficient and up to date. The idea of larger corporations is much like how normal pedestrians view celebrities. They like the smaller businesses to be more recognizedwhether it be by themselves, political figures, or the governmentthan the big corporations because of the familiarity (Small is not, 2012).

Which Business Model is Better? Large or Small? While it would be a tad difficult to give a cookie cutter answer as to which business model is going to fix the economy, there are different perspectives that can be used to make it easier to determine which model works best. While many of my sources regarding business support all that small and locally owned businesses do for the

9 In the Ring: Small and Large Businesses economy, the truth of the matter is is that neither a large or a small business model really are magic in the sense of fixing the economy. The true answer is that neither one should be fully praised for any improvement in the economy. The Economists article counters that opinion by listing that sometimes smaller businesses are not better. This article, instead, proposes that instead of looking at the size of the business, that the growth should be the major highlight or drawback of the business. While its known that not every independent company has the desire to be the next supernova corporation, it still does help to see how the companys goals and ideals are met over time. By observing a locally owned business that has launched and remained stagnant since opening, it goes to show that the company has little responsibility for improvement to the local economy. But by seeing a consistent pattern of excelled growth and even expansion, one can assume that the company is in it for the long haul. The journal states, In a healthy economy, entrepreneurs with ideas can easily start companies, the best of which grow fast and the worst of which are quickly swept aside. Size doesn't matter, growth does ("Small is not," 2012). The Economist points out that smaller businesses provide jobs for locals, which is why so many people normally side with smaller business models. By focusing on growth of a company, we as a country can see how the growth of these businesses contributes to our healing economy.

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Reference Page 1) Mott, A. (2013). What type of business are beauty salons?. Retrieved from http://smallbusiness.chron.com/type-business-beauty-salons-32010.html 2) Limited liability company (llc). (2013, September 03). Retrieved from http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/LimitedLiability-Company-(LLC)

3) Pakroo, P. (2013). Limited partnerships and limited liability partnerships: The partnerships that limit personal liability for business debts.. Retrieved from http://www.nolo.com/legal-encyclopedia/limited-partnerships-limitedliability-partnerships-29748.html 4) DAZ, A. (2013). Landmark study: Economys future lies in locally owned companies. Caribbean Business, 41(14), 8. (http://web.ebscohost.com/bsi/detail?vid=10&sid=cae7202f-e5f2-4e6c-a134e3472d59d53b%40sessionmgr13&hid=20&bdata=JnNpdGU9YnNpLWxpdmU%3d#db=bth&AN=873317 52 5) Butler, M. (2013). Fusions salon observations. Unpublished manuscript, University of North Carolina at Charlotte, Charlotte, NC, . 6) MEREDITH, B. H. (2012). Small business gets it; big business doesn't. NZ Business, 26(10), 63.

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7) Small is not beautiful. (2012, March 03). Retrieved from http://www.economist.com/node/21548945 (http://www.economist.com/node/21548945)

8) Megalli, M. (2006). NO SMALL DIFFERENCES. B To B, 91(10), 12.

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9) Green, R. (2004). Get Self-organized--How Top-Down Businesses Exploit the Power of Bottom-Up Self-Organization. Journal Of Organizational Excellence, 24(1), 85. doi:10.1002/npr.20040

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