ENTREPRENEURSHIP

Chapter 33

WHAT IS ENTREPRENEURSHIP The process of starting and managing

your own business

Entrepreneurs – are people who organize, manage, and take a risk to own a businessExamples: Henry Ford – Ford Company

Ray Kroc – McDonalds Bette Graham – Liquid Paper Terri Tuttle - Baxters Tyler Megargel – Crayola Coloring Sheets

RISKS OF ENTREPRENEURSHIP? Losing money – your investment

No guarantee for success: Lots of time and effort

MAIN ADVANTAGES OF ENTREPRENEURSHIP Personal freedom – Not controlled by

anyone else, can set own schedules

Personal satisfaction – Doing what you enjoy

Increased income – rewards for hard work

Increased self-esteem – From being successful

DISADVANTAGES OF ENTREPRENEURSHIPS Potential loss of income – could lose

money

Long and irregular hours

Necessity for strong self-discipline –

May have to do tedious, time-consuming tasks such as cleaning, answering phones, paperwork

WHY IS ENTREPRENEURSHIP IMPORTANT TO OUR ECONOMY??? Small businesses provide 55% of jobs for

our labor force Small businesses produce 50% of the

Gross Domestic Product (goods and services produced in the U.S. using our labor and property)

Offer consumers choices of goods and services

Improve products and processes Challenge existing businesses to become

better Generates jobs

CHARACTERISTICS OF SOLE PROPRIETORSHIP Owned and operated by one person The most common form of business

ownership Approximately 70% of all U.S.

businesses fall into this category

ADVANTAGES OF SOLE PROPRIETORSHIP Gets to keep all of the profits Relatively easy to start Get to make all business decisions on own

Taxed less than any other business

More freedom from government regulation

DISADVANTAGES OF SOLE PROPRIETORSHIP Unlimited liability – you have all of the

responsibility for the debt Limited assets such as money to

reinvest in business Making all of decisions can be hard

PARTNERSHIP Characteristics – legal agreement

between 2 or more people to start a business

Only 10% of businesses in U.S. Should have a partnership agreement –

done by an attorney

TYPES OF PARTNERSHIP

General Partnership – each partner shares in the profits and losses (unlimited liability)

Limited Partnership – each partner is limited for any debts only up to the amount of investment; Limited partners typically have no voice in the decisions of the business

ADVANTAGES OF PARTNERSHIP Combines the skills of the owners Have more money to work with Taxed less heavily than a corporation

DISADVANTAGES OF PARTNERSHIP Owners may not always agree Partners actions are legally

binding on other partners Business is dissolved if one

partner dies

CORPORATION Characteristics:

Business that is chartered by the state

Legally operates apart from the owner or owners

Most complicatedHave a board of directors who make decisions for the corporation

STOCKHOLDERS People who actually have ownership in

the corporation and have limited liability

Stock – unit of ownership in the corporation

ADVANTAGES OF CORPORATION Owners have limited liability Easier for corporation to raise money People can easily enter and leave the

business Each operation area is typically

professionally managed

DISADVANTAGES OF CORPORATION Complex to form Increased government regulation

Higher taxes on profits Intricate accounting and record keeping

LEGAL STEPS TO STARTING A BUSINESS Sole proprietorships and partnerships -

File for a “Doing Business As” (DBA) – your county government recognizes that your business exists.

Corporations – File for “Articles of Incorporation” – with securities bureau in state department of commerce (name, address, purpose, directors, and amount of stock to each director)

LEGAL STEPS (CONT.) Local licenses – zoning ordinances,

building codes, safety standards

Obtain a state license – protects people from unqualified people practicing in a business Examples: Doctors, accountants,

cosmetologists, barbers, marriage counselors, and pharmacists

FRANCHISES An agreement to operate a business in

the name of a recognized companyFranchisee – the person purchasing the

franchiseFranchisor – the owner of the franchiseMust run the franchise per the franchisor’s

specifications

http://www.culvers.com/franchise/how.aspx

http://www.steaknshakefranchise.com/costs-and-qualifications-requirement-information.php