Entrepreneurs and Business Organizations
Chapter 9
What is an entrepreneur?
Entrepreneur: a person or group who invests, creates, or takes on the risk of starting a new business or company. Or, they might have an idea that they think they can profit from.
Entrepreneurs affect or help the economy by:• Creating jobs• Meeting consumer demand for products/services• increasing economic growth
Successful Entrepreneurs are/have…
AmbitiousSelf-confident
Willing to take risks
Energy and self-discipline
Perseverance
Problem-solving skillsOrganizational skills
Ability to motivate others
Risks and Rewards of Starting a Business
Risks• Failure• Raising the money for
the company• Financial insecurity• Hiring the right
employees• Long hours• Little to no pay
Rewards• Potential for increased
pay or profit• Freedom in your life• Enjoyment of your
hobby as your profession
• Be your own boss
3 Main Types of Businesses
Sole Proprietorship: a business owned and managed by one person.
Partnership: a business owned by two or more co-owners who share profits.
Corporation: owned by public or private shareholders who own stock
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Sole Proprietorship
Advantages• Easy start-up
• Little paperwork• Business name, permits,
licenses• Few restrictions• Make all decisions• Keep profits• File individual taxes
• No business taxes• Easy to close down
Disadvantages• Unlimited liability
• You pay all losses• Personally responsible
for all debt• Create LLCs for
protection• Limited Liability
Company• Limited growth
potential• Limited life
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Partnerships
Partnerships have 2 or more owners who share the profits and liabilities of the company.
Common partnerships include:• Family owned business• Law firms• Medical practices
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Different Types of Partnerships
General Partnerships (GP): all owners share total liability for debts and are involved in all decisions
Limited Partnership: there is at least one general partner and at least one limited partner.
• Limited partner: referred to as a “silent partner”. This person contributes financial capital (money) to the business but does not have a say in day-to-day operations. They only lose what they invest.
Limited Liability Partnership (LLP): owners act like GPs but have limited liability
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Advantages and Disadvantages of Partnerships
Advantages• Easy start- up, just need
legal agreement: Articles of rules and regulation
• Few restrictions• Share decision-making
power• Opportunities for
specialization• File individual taxes• Larger growth potential
• Banks more willing to loan out to multiple partners
Disadvantages• Unlimited liability for
GP• Conflict between
partners• Continuity issues
• Partners may die or leave the business
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Corporations
A business becomes a corporation when it is owned by shareholders who purchased shares of the company’s stock.
Venture Capitalist: someone who invests money into a new promising business and receives share of ownership of the company. They provide capital (money) so that a company can grow its business
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Two Types of Corporations
Privately Owned: owned by one person or a very small group. Stocks sold to a select group of people
Publically Owned: offers stock to the general public and has many shareholders
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Multinational Corporations
Corporations have business in multiple countries
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Advantages and Disadvantages of Corporations
Advantages• Limited liability
• Shareholders only lose what they invest
• Larger growth potential• Professional
management• Long business life
Disadvantages• Complex start up• Loss of control
• Board of directors make decisions, business founder
• Increased government regulation• Stockholder meetings required
• Double taxation• Business pays taxes as well as
shareholders
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Franchises, Cooperatives, and Non-Profits
Franchise: In which one company has many individual outlets to sell its products or services
Cooperatives: business that is owned and operated by a group of individuals for their shared benefit. The goal is to make goods and services more affordable, not to make a profit.
• Must have some sort of membership to take advantage of shared benefits.
Non-profit: Functions like a business aside from the fact that making a profit is not the goal. They are established to support a public or private goal.
• Foundations, associations, booster clubs
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Advantages and disadvantages of Franchises
Advantages• Company expands with
each new franchise• Cheaper for the company
to open new locations itself
• New owners receive a support system
• Better chances for profit• A customer base already
exists
Disadvantages• Must pay fees to open
the franchise• Must pay royalties (on
top of usual costs of operations)
• Lack of independence in terms of running the business
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Rights and Responsibilities of Businesses
Rights• Right to advertise• Hire and fire employees• Screen employees• Be compensated for
property lost • Govt must pay for property
they take• Right to protect
intellectual property• Trademarks, patents
Responsibilities• Obtain permits and
licenses• Pay taxes• Deal honestly• Honor contracts• Create an equal
opportunity workplace• Produce safe products• Protect whistle-blowers
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Business Ethics: Legal vs. Ethical
There are things that companies are legally able to do, but this does not mean that they should do those things.Let's Get Ethical
Morality is starting to play a big role in the business market. Do you notice a growing trend in companies appealing to your morals?
Corporate Responsibility: taking responsibility for a company’s actions that impact
Corporate Citizen: something that business strive to be by being considerate of the interests of their stakeholders (those who have an interest in or are affected by a company’s actions)
Business Ethics: ways in which companies address corporate responsibility. They are principles that guide the actions of the company and its employees.
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Must Think About the Consumers
Consumer Sovereignty: power of consumers to affect the decisions of a company.
Consumers communicate their power through their spending. What consumers spend their money shows what they want.
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