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Entrepreneurs and Business OrganizationsChapter 9

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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

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What characteristics would you look for in an entrepreneur?Take a few moments are write down 4 characteristics in the space provided on your note sheet

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Successful Entrepreneurs are/have…

Ambitious

Self-confident

Willing to take risks

Energy and self-discipline

Perseverance

Problem-solving skills

Organizational skills

Ability to motivate others

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WHAT DO YOU THINK THE RISKS ARE FOR STARTING A BUSINESS? WHAT ABOUT THE REWARDS?Take some time and think to yourself what these things can be. Then get with a buddy and share your thoughts.

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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

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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

8Sole 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

9Partnerships

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

12Corporations

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.

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.

• Business Ethics: What not to do

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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.