Chapter 5 Proprietorships & Partnerships Characteristics of an Entrepreneur Getting a Business Started Proprietorships Partnerships

Characteristics of an Entrepreneur Risk Takers Enjoy freedom and independence Enjoy making their own decisions Leaders Energetic Good Thinkers

Activity #1 Adv. & Dis. of Entrepreneurship Advantages Disadvantages

Proprietorships Sole Proprietorship - is a business owned and operated by one person. The owner furnishes the money, management, and labor. The owner is entitled to all of the profits of the business. Creditors - those to whom money is owed. if the owner has debts, creditors have first claim against the assets.

Advantages Disadvantages Sole Proprietorship Is a business owned by 1 owner Advantages Disadvantages

Advantages of a Sole Proprietorship Owner is the boss Owner receives all of the profits Owner personally knows employees and customers Owner can act quickly in decision making Owner is free from Red Tape Owner pays less income tax than a corporation

Disadvantages of a Sole Proprietorship Owner may lack special skills and abilities Owner may have to work longer hours Owner may lack funds Owner bears all losses Illness or death may close the business

Advantages Disadvantages Partnership Is a legal agreement between 2 or more people to be jointly responsible for the success or failure of a business. Advantages Disadvantages

Advantages of Partnerships No limit to the number of partners Skills and abilities are pooled Sources of capital are increased Credit position is improved Contribution of Goodwill Increased concern in business management Less tax burden than corporations Elimination of Competition Retirement from Management

Disadvantages of Partnerships Unlimited Financial Liability Disagreement among partners Each is bound by the contracts of others Uncertain Life Limited Sources of Capital Unsatisfactory division of profits Difficulty in withdrawing from partnership

Limited Partnerships Limited Partnerships - not all of the partners have unlimited liability to the debts of the business. however, there must be at least one general partner that has unlimited liability and the limited partner cannot be named in the name of the company. This is an ideal situation for those who do wish to invest in the company, but do not have time or the interest to actively participate in its management.