Business Organizations By: Mrs. Stonis-Anderson

Objectives Describe profit, risk-taking, and entrepreneurs. Describe service, merchandising, and manufacturing businesses. Compare the sole proprietorship, partnership, and corporate forms of business. List the advantages and disadvantages of each form of business organization.

Business Description Describe the business you are, or want to be, it should include Form of Business Specific product or service Proposed location of the business https://www.sba.gov/content/tips-choosing-business- location Existing potential customers, their geographic area: domestic, international Brief history How was or will the business be financed Who are, or will be, the owners

When you hear the word business, what do you think of?

What is an Entrepreneur? (Instructor: You can just press play on this or do an intro…the video needs no introduction. Inside scoop: As a backgrounder, “Grasshopper” is a company which provides services to start up entrepreneurs. The entrepreneur who founded the venture has a wife with a creative design firm - @Sonja on Twitter – her firm did this movie. A family of entrepreneurs. It was so successful, large companies started copying it.) http://bit.ly/vZi7jy @Copyright Katherine Korman Frey www.kathykormanfrey.com

Shark Tank https://www.youtube.com/watch?v=qFShW- qxPM4

What is an Entrepreneur? One who creates a new business in the face of risk and uncertainty for the purpose of achieving profit and growth by identifying opportunities and assembling the necessary resources to capitalize on them.

The Environment of Business When you hear the word business, what do you think of? In the U.S. we have a free enterprise system; people are free to produce goods and services and spend money as they wish. A business can operate at a profit or a loss. If the revenues are greater than the costs, the money left over is profit. When costs are greater than revenues, the business operates at a loss. In order to survive, a business must operate at a profit, and have an individual willing to take the risk to run it

The Need for a Risk-Taker In a business, inventors generate ideas, employees provide labor, and managers supervise. An entrepreneur transforms ideas into actual businesses.

Benefits of Entrepreneurship The opportunity to: Create your own destiny Make a difference Reach your full potential Reap impressive profits Contribute to society and to be recognized for your efforts Do what you enjoy and to have fun at it Ch. 1: The Foundations of Entrepreneurship

Drawbacks of Entrepreneurship Uncertainty of income Risk of losing your entire investment Long hours and hard work Lower quality of life until the business gets established High levels of stress Complete responsibility Discouragement Ch. 1: The Foundations of Entrepreneurship

FIGURE 1.5 Small Business by Industry Source: U.S. Small Business Administration, 2007. Ch. 1: The Foundations of Entrepreneurship

Ten Deadly Mistakes of Entrepreneurship Management mistakes Lack of experience Poor financial control Weak marketing efforts Failure to develop a strategic plan Ch. 1: The Foundations of Entrepreneurship

Ten Deadly Mistakes of Entrepreneurship Uncontrolled growth Poor location Improper inventory control Incorrect pricing Inability to make the “entrepreneurial transition” Ch. 1: The Foundations of Entrepreneurship

Avoiding the Pitfalls of Small Business Failure Know your business in depth Develop a solid business plan Manage financial resources Understand financial statements Learn to manage people effectively Set your business apart from the competition Maintain a positive attitude Ch. 1: The Foundations of Entrepreneurship

Conclusion Entrepreneurs: Are an important part of the free enterprise system Are a diverse and talented group of people Represent a cross-section of society as a whole Are able to enhance the profitability of their businesses through acquiring additional knowledge and experience Ch. 1: The Foundations of Entrepreneurship

Thinking Entrepreneurial Who is one person, famous or not, who has made a difference?

Traits of Entrepreneurs Most entrepreneurs: are self-starters. have organizational skills. have marketing knowledge. have accounting skills. .

Role of Entrepreneurs There are pros and cons to being an entrepreneur. .

Entrepreneur – Who, Me? Have you thought about owning a business? If so, you should ask yourself these questions: Do you have good writing and speaking skills? Are you creative or mechanical? Are you a self-starter? Do you have accounting or marketing skills?

Characteristics of an Entrepreneur Which item does not belong on the Entrepreneur List? Action oriented Always strives to do things better Drive to achieve results Does not need supervision to get tasks done Likes to work the same hours every day Incredibly persistent

“Likes to work the same hours every day” why do you think this does not fit in a description of an entrepreneur. “Likes to work the same hours every day”

Entrepreneurial Passion Discuss one area about which you are passionate. What are problems you’d like to see solved or areas of need related to this area? How could you make a business out of solving that problem?

Types and Forms of Business In a free enterprise system, an entrepreneur can choose the type and form of business to run. .

Forms of Business Organization Most U.S. businesses are organized in one of three ways: sole proprietorship partnership corporation

Types of Business Operations There are three types of business operations: Service businesses provide services for fees. Merchandising businesses buy and sell finished products. Manufacturing businesses buy materials and make finished products. Each type needs capital (money) from investors, banks, or business owners to begin.

Example of Merchandising Business Example of Service Business Example of Merchandising Business Example of Manufacturing Business

Key Terms manufacturing business A business that buys raw materials and transforms them into financial products by using labor and machinery. service business Work that is done for others as an occupation or business. sole proprietorship A business owned by one person. partnership A business owned by two or more persons, called partners, who agree to operate the business as co-owners. .

Key Terms corporation A business organization recognized by law to have a life of its own. charter The legal permission, granted by a state, that gives a corporation certain rights and privileges and spells out the rules under which the corporation is to operate. Subchapter S A special form of corporation that allows the protection of limited liability but direct flow-through of profits and losses .

Sole Proprietorship Sole means “single” and proprietor means “owner.” A sole proprietor is a single owner, but the operation may have many managers and employees. There are advantages and disadvantages to being a sole proprietor.

Advantages of the Sole Proprietorship Simple to create Least costly form to begin Profit incentive Total decision making authority No special legal restrictions Easy to discontinue Ch, 5: Forms of Business Ownership

Liability Features of the Basic Forms of Ownership Sole Proprietorship Claims of Sole Proprietor’s Creditors Sole Proprietor’s Personal Assets Ch, 5: Forms of Business Ownership

Partnership When two people enter into an agreement to operate a business as co-owners, a partnership is formed. There are advantages and disadvantages to a partnership.

Corporation A corporation often starts off as a sole proprietorship or partnership. In order to become a corporation an organization must obtain a charter (legal permission to operate). There are advantages and disadvantages to a corporation.

Choosing a Form of Ownership There is no one “best” form of ownership. The best form of ownership depends on an entrepreneur’s particular situation. Key: Understanding the characteristics of each form of ownership and how well they match an entrepreneur’s business and personal circumstances. Ch, 5: Forms of Business Ownership

Business Description Describe the business you are, or want to be, it should include Form of Business Specific product or service Proposed location of the business https://www.sba.gov/content/tips-choosing-business- location Existing potential customers, their geographic area: domestic, international Brief history How was or will the business be financed Who are, or will be, the owners

Importance of Business Location Critical to the success of a business. Especially for retail businesses. What happens when you pick a poor location? Established business it is still necessary to check the suitability There is much to consider when deciding on the location of your business, including: customer profile transport neighborhood finances the longer term future. should not be a once-only decision. Review your location at lease renewal and when establishing a new outlet.