Chapter 5 Proprietorships and Partnerships BellWork List some characteristics you think an entrepreneur should posses. Chapter 5 Proprietorships and Partnerships

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

Lesson 5.1 Entrepreneurship OBJECTIVES Describe the characteristics of successful entrepreneurs. Discuss the responsibilities of owning your own business. Chapter 5 Proprietorships and Partnerships

Characteristics of Entrepreneurs Entrepreneurs who prefer self-employment enjoy the freedom and independence that come with being their own bosses and making their own decisions. Entrepreneurs are self-starters who have plenty of energy and enjoy working on their own. Entrepreneurs obtain work experience in the types of businesses they launch.

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

Getting a Business Started Starting a business entails many more responsibilities than simply being an employee does.

Prepare a Business Plan Before starting a business, you need to prepare a business plan. Is a written document that describes the nature of the business, its goals and objectives, and how they will be achieved. Developing a business plan will help you see more clearly the risks and responsibilities involved in starting a business, and will help you decide whether you really want to go into the business.

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

Government Support The U.S. government has a strong support network to help entrepreneurs and small businesses. The Small Business Administration (SBA) is a government supported agency that counsels, assists, and protects the interests of small businesses. SBA also sponsors free consulting assistance through Small Business Development Centers (SBDCs). They provide help in researching and writing business plans.

Assume the Responsibilities of Business Ownership By developing a workable business plan, entrepreneurs become aware of their risks. Aspiring entrepreneurs should carefully consider the responsibilities of ownership before opening a business. Ownership offers opportunities to make one’s decisions and to experience other rewards.

Intrapreneurs People that take the responsibility of developing a new innovation in a larger company. Most large businesses realize that they must be innovative in order to compete against the smaller start-up businesses.

Question Which of the following is not characteristics of entrepreneurs? They are self-starters They like to make sure others do most of the work. They enjoy working on their own They usually work hard and for long periods Answer: They like to make sure others do most of the work

Question Business plan is a written document that j Describes that nature of business Describes that company’s goals and objectives Describes how goals and objectives will be achieved All of the above Answer: All of the above

Assignment Research 2 companies and talk about the different elements of their business plan. Make sure that you discuss the nature of the business, their goals and objectives, marketing plan, financial plan, and organizational plan. Please refer to figure 5-1 on page 114, to see exactly what each section needs to indicate.

Lesson 5.1 Entrepreneurship OBJECTIVES / Exit Ticket Describe the characteristics of successful entrepreneurs. Discuss the responsibilities of owning your own business. Chapter 5 Proprietorships and Partnerships

Chapter 5 Proprietorships and Partnerships BellWork List some advantages and disadvantages of starting a proprietorship. Chapter 5 Proprietorships and Partnerships

Lesson 5.2 Proprietorship Objectives Explain the advantages and disadvantages of proprietorships. Describe the types of businesses suited to being proprietorships. Chapter 5 Proprietorships and Partnerships

Nature of Proprietorship The most common form of business organization is the proprietorship. Proprietorship (also called sole proprietorship) — business owned and managed by one person (proprietor), who furnishes expertise, money, and management and is entitled to all profits Provided that no debt are owed, a proprietor has full claim to the assets, or property owned by the business. If the proprietor has business debt, creditors (those whom money is owed) have first claim against the assets.

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

Business Suited to Being Proprietorship This kind of business is primarily concerned with providing personal services. Ex: dentist, accountants, landscape, gardeners, painters, etc. Not all proprietors run full-time businesses. Up to a third of all proprietorships are part-time

Question Advantages of proprietorships include all of the following except Owner is their own boss Owner receives all the profits Owner deals with limited red tape Owner pays more taxes than corporations Answer: Owner pays more taxes than corporations

Question Disadvantages of proprietorship include all of the following except Owner is likely to have all of the skills needed for the business Owner may lack funds Owner bears all the losses Owner may need to close the business in case of illness. Answer: Owner is likely to have all of the skills needed for the business

Assignment Research ten businesses in your area and determine if they are full-time or part-time proprietorships. Pick two of these businesses and based on the business that you picked, compare and contrast the two. Talk about why one might succeed and one might fail. Where they are located, etc.

Lesson 5.2 Proprietorship Objectives / Exit Ticket Explain the advantages and disadvantages of proprietorships. Describe the types of businesses suited to being proprietorships. Chapter 5 Proprietorships and Partnerships

Chapter 5 Proprietorships and Partnerships BellWork List some advantages and disadvantages of starting a partnership. Chapter 5 Proprietorships and Partnerships

Chapter 5 Proprietorships and Partnerships Lesson 5.3 Partnership Objectives Explain advantages and disadvantages of partnerships. Describe the types of businesses suited to the partnership form of business. Chapter 5 Proprietorships and Partnerships

Nature of Partnership Partnership — business owned by two or more people A key factor in partnership is that the partners must clearly agree upon each person’s responsibilities General partnership — each partner is personally liable for all debts incurred by partnership

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 For all the debts of the business 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

Limited Liability Limited partnership — liability of each partner is restricted to amount of partner’s investment Not all partners have unlimited financial liability for the partnership debts. At least one partner must be a general partner who has unlimited liability Is a useful for of business organization in situations where one person wishes to invest in a business but does not have the time or interest to participate actively in its management.

Businesses suited to being Partnerships and Business Name Is common among businesses that furnish more than one kind of product Ex: car dealers often have sales and service department. May be conducted under the name or names of the owner or owners In many states, the law prohibits the use of and company or & Co., because that name indicates at least three partners.

Question Advantages of partnership include all of the following except Partners can pool skills and abilities Partners provide greater amounts of capital Partners have limited liability The business’s credit is improved Answer: Partners have limited liability

Question Disadvantages of partnership include all the following except Partnerships may reduce competition Partners may disagree Partners are bound by contracts of others Partnerships have an uncertain life

Assignment Break up into each pair of business partners. Complete “My Business, Inc.” project on page 135. Make sure fully research the “Data Collection” section. Write the questions out for the “Analysis” section and answer the questions appropriately. If you finish early, please complete the “Case in Point” on page 133-134

Chapter 5 Proprietorships and Partnerships Lesson 5.3 Partnership Objectives / Exit Ticket Explain advantages and disadvantages of partnerships. Describe the types of businesses suited to the partnership form of business. Chapter 5 Proprietorships and Partnerships