B USINESS O WNERSHIP Introduction to Business & Marketing

O BJECTIVES Define entrepreneurship. Understand the importance of small businesses in the economy. Identify the major types of business ownership. Compare advantages and disadvantages of the different types of business ownership.

E NTREPRENEURSHIP Entrepreneurship is the process of starting and managing your own business. An entrepreneur is someone who attempts to earn money and make profits by taking the risk of owning and operating their business.

T HINK A BOUT I T … Who are some famous entrepreneurs that you know? What business did they start? Who are some entrepreneurs you know personally? What business did they start? WHY do you think these people decided to start their own business?

E NTREPRENEURSHIP  Personal freedom  Personal satisfaction  Potential for increased income  Risk / potential of loss  Long, irregular hours  Need for daily discipline AdvantagesDisadvantages

T HINK A BOUT I T … What personality traits, qualities, or skills are needed in order to be a successful entrepreneur?

C HARACTERISTICS OF E NTREPRENEURS Risk taker Decision maker Hard worker Ambitious Goal setter Enjoys challenges Can adapt to changes

T YPES OF B USINESS O WNERSHIP Sole Proprietorship Partnership Corporation Limited Liability Company (LLC)

I MPORTANCE OF S MALL B USINESS  Small businesses provide 55% of jobs.  There are 1/2 million business started each year – only the strong survive!

S OLE P ROPRIETORSHIPS About 3/4 of all businesses in the United States are sole proprietorships. A sole proprietorship is a business owned by one person. Sole proprietors usually have a special skill by which they can earn a living (i.e. plumbers, contractors, wedding planners, etc.).

S OLE P ROPRIETORSHIPS Easy to start up Able to make all decisions for the business Keep all profits Unlimited liability Limited access to credit or financing Owner may not have all the skills or expertise necessary Business dissolves when the owner dies AdvantagesDisadvantages

P ARTNERSHIPS A partnership is a business owned by two or more people who share its risks and rewards. A partnership agreement outlines the rights and responsibilities of each partner.

P ARTNERSHIPS Easy to start up Easier to obtain money Each partner contributes Bank more likely to lend Each partner brings different skills and talents to the business All partners share risk May be held responsible for partner’s mistakes Unlimited liability Personality conflicts can affect decision making AdvantagesDisadvantages

C ORPORATIONS A corporation is a company that is registered by a state and operates apart from its owners. The owner must get a corporate charter (business license) from the state where the main office will be located. To raise money, the owners can sell stock (shares in the company) to stockholders. The company must have a board of directors to govern the corporation.

D ID Y OU K NOW ? Most “big name” businesses are corporations. Only 15 – 20 percent of all businesses in the United States are corporations. Corporations are responsible for 80% of all business that is conducted in the United States.

C ORPORATIONS Limited liability Owners are only responsible for the capital they invested Easy to raise money by selling stock Business continues after owner’s death Professionally managed (hire experts) Double taxation Company pays tax on income Stockholders pay tax on profits More government regulations Difficult and costly to start Complex business to run AdvantagesDisadvantages

S WEET W EB Q UEST ! Candy Companies & Types of Businesses

S UBCHAPTER S C ORPORATION One type of corporation Small business that is taxed like a partnership or sole proprietorship but has up to 35 shareholders

L IMITED L IABILITY C OMPANY Also known as LLC Relatively new form of ownership Hybrid of a partnership and corporation Owners protected from personal liability Profits / losses pass directly to owners without taxation to the company itself

F RANCHISES A franchise is a legal agreement to use the name and sell the products of a parent company in a designated geographic area. Franchisee: person who buys the rights to operate the business Franchisor: recognized company that allows independent owners to use their name The franchisee pays the franchisor an annual fee and a share of the profits.

F RANCHISES Owner receives thorough business training Uses a tested management system Owner is guaranteed a certain geographic area Usually widely recognized names High initial cost Owner has to follow strict rules and regulations Judged by performance of peers AdvantagesDisadvantages

D ID Y OU K NOW ? Many businesses start as one form of business ownership, but move into other forms later. Example: Ben & Jerry’s started as a partnership, became a Subchapter S Corporation, and then eventually became the corporation we know today.

T OP 10 F RANCHISES Online Article with Worksheet