Chapter 5 Proprietorships and Partnerships ©2008 Thomson/South-Western

Characteristics of Entrepreneurs Self-starters Energetic Independent Take-charge Creative Personable Experienced Well informed Chapter 5 Proprietorships and Partnerships

Getting a Business Started Business plan Government support Small Business Administration (SBA) Responsibilities of business ownership Intrapreneurs Chapter 5 Proprietorships and Partnerships

Elements of a Business Plan Nature of the Business Detailed description of products and/or services Estimation of risk based on analysis of industry Size of business Location of business Background of entrepreneur(s) Goals and Objectives Basic results expected in the short and long run Results expressed as sales volume or profits Marketing Plan Customers and demand for the product or service Prices for the product or service Comparison of product or service with competitors Financial Plan Investment needed to start and maintain business Projected income, expenses, and profit Cash start-up and cash flow needs Organizational Plan Legal form of ownership Legal factors: licenses, leases, contracts Organization chart Job descriptions and employee skills needed Physical facilities: building, equipment, tools Chapter 5 Proprietorships and Partnerships

Chapter 5 Proprietorships and Partnerships Proprietorship (also called sole proprietorship) — business owned and managed by one person, who furnishes expertise, money, and management and is entitled to all profits Chapter 5 Proprietorships and Partnerships

Advantages of Proprietorship Owner is boss. Owner receives all profits. Owner personally knows employees and customers. Owner can act quickly in decision making. Owner is free from red tape. Owner usually pays less income tax than a corporation. Chapter 5 Proprietorships and Partnerships

Disadvantages of Proprietorship Owner may lack necessary skills and abilities. Owner may lack funds. Owner bears all losses. Illness or death may close the business. Chapter 5 Proprietorships and Partnerships

Chapter 5 Proprietorships and Partnerships Partnership — business owned by two or more people General partnership — each partner is personally liable for all debts incurred by partnership Limited partnership — liability of each partner is restricted to amount of partner’s investment Chapter 5 Proprietorships and Partnerships

Advantages of Partnerships Skills and abilities pooled Sources of capital increased Credit position improved Contribution of goodwill Increased concern in business management Lower tax burden than corporations Reduction in competition Retirement from management Operating economies Chapter 5 Proprietorships and Partnerships

Disadvantages of Partnerships Unlimited financial liability Disagreement among partners Each partner bound by contracts of others Uncertain life Limited sources of capital Unsatisfactory division of profits Difficulty in withdrawing from partnership Chapter 5 Proprietorships and Partnerships