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MHIC LICENSE EXAM
Top reasons businesses fail (8 examples, two umbrella reasons)
poor planning + inadequate management (poor sales, competitive weakness, high
operating expenses, difficulty collecting invoices, inventory problems, too many
fixed assets, poor location, fraud)
What is an entrepreneur?
individual engaged in strategic activities that begin & develop a business, created
to build long-term value and steady cash flow
What are the functions of a business plan (3)?
Planning tool, loan/investor document, benchmarking tool
Components of a business plan (7)
Cover page, executive summary, company summary, products & services, market
analysis, marketing strategy, financial plan
Common business plan pitfalls (4)
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,Not realistic, language is too complex for investors/others to understand, risks are
not focused on in comparison to opportunities, competition analysis is poor
Sole Proprietorship Structure Info (5)
simplest business structure (1 owner), no liability protection, low start up cost,
taxes reported as additional income to owner, hard to get financing
General Partnership Structure Info (6)
Pros: Easy to form, direct profit rewards, larger management base than SP
Cons: no liability protection, more decision makers, changing partners can be very
difficult
C-Corporation Structure Info (9)
Pro: separate legal entity (owner v business), limited liability for shareholders,
unlimited business life, availability for capital financing, transfer of ownership
through stock
Cons: complex and expensive, limitations of activities and decisions by board and
shareholders, extensive regulation and book-keeping required, double taxation
S-Corporation Structure Info
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,Similar to C-Corp. Domestic corporation w/ one class of stock. Must have 100 or
less shareholders (citizens), all shareholders must consent to S format, no double
taxation, must file form 2553
Limited Liability Company (LLC)
limited disclosure of owners, limited documentation required, no advanced IRS
filing, no public disclosure of finances, can delegate management to a non-
member. Can be taxed as a sole prop or corp
Joint Venture Info
specific business arrangement formed on a project basis to integrate positive
attributes and resources of both companies
What happens when you have good risk management (3)
lowers business and liability insurance premiums, reduces chances of being sued,
improves chances of prevailing in a lawsuit
All-Risk Builders Risk Insurance
property insurance that covers property owners and builders for a project under
construction
Covers equipment, materials, machinery, etc
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, Owners may require contractors to have All-Risk Insurance (must be requested in
writing)
Named Peril Builders Risk Insurance
Insurance policy having narrower coverage and all risk insurance and specify what
peril are covered typically for fire lightning also wind damage explosion water
damage earthquakes terrorism
Inland Marine/Equipment Theft Insurance
property insurance for tools and equipment . covers theft of goods in transit and
project under construction
Equipment Floater Policy
type of inland marine insurance that covers mobile equipment while stored on
premises, in transit, or in temporary job sites
Transportation Floater Policy
protects transporter from damages against freight during transport
Motor Truck Cargo Insurance
Protects the transporter in the event of damaged or loss freight
Commercial General Liability Insurance
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