©2013 Cengage Learning. All Rights Reserved. Business Management, 13e Managing the Form of Business Ownership Entrepreneurs and Proprietorships Partnerships Corporate Forms of Business Ownership Specialized Types of Organizations CHAPTER 10

©2013 Cengage Learning. All Rights Reserved. Business Management, 13e Entrepreneurs and Proprietorships GOALS ● Describe the characteristics of successful entrepreneurs. ● Evaluate the role of planning in managing your own business. ● Explain the management issues of proprietorships. 2 CHAPTER 10

©2013 Cengage Learning. All Rights Reserved. Business Management, 13e Characteristics of Entrepreneurs ● Entrepreneurs ● A person who assumes risk of starting, owning, and operating a business for the purpose of making profit. ● Self starters who have plenty of energy and enjoy working on their own ● Intrapreneurs ● An employee who is given funds and freedom to create a special unit or department within a company to develop a new product, process, service. 3 CHAPTER 10

©2013 Cengage Learning. All Rights Reserved. Business Management, 13e Checkpoint ● Explain why businesses start-ups often fail? CHAPTER 10 4

©2013 Cengage Learning. All Rights Reserved. Business Management, 13e Checkpoint ● Explain why businesses start-ups often fail? ● Financial reasons ● Owners are not suited to entrepreneurship CHAPTER 10 5

©2013 Cengage Learning. All Rights Reserved. Business Management, 13e Planning a Business ● Business plan ● Describes nature of the business, goals and objectives, and how it will achieve them. ● Forms of ownership ● Proprietorships ● Partnerships ● Corporations 6 CHAPTER 10

©2013 Cengage Learning. All Rights Reserved. Business Management, 13e Checkpoint ● Describe two advantages of developing a business plan? CHAPTER 10 7

©2013 Cengage Learning. All Rights Reserved. Business Management, 13e Checkpoint ● Describe two advantages of developing a business plan? ● Identify the risks and responsibilities of owning a business ● Inspire confidence in potential investors ● Identify problems ● Help entrepreneurs become more realistic CHAPTER 10 8

©2013 Cengage Learning. All Rights Reserved. Business Management, 13e The Nature of Proprietorships ● A Business owned and managed by one person ● Proprietor ● Creditor – person or business to which money is owed ● Management issues of proprietorships ● Self management ● Relationship management ● Speed of decision making ● Freedom from red tape ● Liability 9 CHAPTER 10

©2013 Cengage Learning. All Rights Reserved. Business Management, 13e The Nature of Proprietorships ● Businesses suited to proprietorship ● Small enough to be managed by the proprietor or a few people hired by the proprietor ● Does not require a large amount of capital ● Part-time proprietorships ● 1/3 of proprietorships are part time 10 CHAPTER 10

©2013 Cengage Learning. All Rights Reserved. Business Management, 13e ©2013 Cengage Learning. All Rights Reserved. Balance Sheet for Proprietorship 11 CHAPTER 10 © Cengage Learning 2013.

©2013 Cengage Learning. All Rights Reserved. Business Management, 13e Checkpoint ● List the management issues related to sole proprietorships? CHAPTER 10 12

©2013 Cengage Learning. All Rights Reserved. Business Management, 13e Checkpoint ● List the management issues related to sole proprietorships? ● Self management ● Speed of decision making ● Relationship management ● Freedom from red tape ● Liability CHAPTER 10 13

©2013 Cengage Learning. All Rights Reserved. Business Management, 13e Partnerships GOALS ● Discuss the impact of partnerships on managing a business. ● Explain the management issues of partnerships. 14 CHAPTER 10

©2013 Cengage Learning. All Rights Reserved. Business Management, 13e The Nature of Partnerships ● Partnership—a business owned by two or more people. ● Partnership agreement—a written agreement between two or more people identifying how the partners will add capital, labor, or other assets and divide any profits 15 CHAPTER 10

©2013 Cengage Learning. All Rights Reserved. Business Management, 13e Checkpoint ● What are some reasons for considering forming a partnership? CHAPTER 10 16

©2013 Cengage Learning. All Rights Reserved. Business Management, 13e Checkpoint ● What are some reasons for considering forming a partnership? ● A partnership can allow for shared responsibility ● Additional capital ● More management expertise CHAPTER 10 17

©2013 Cengage Learning. All Rights Reserved. Business Management, 13e Management Issues of Partnerships ● Expanded management input ● Capital ● Efficiency ● Tax advantages ● Liability ● Agreement between partners ● Uncertain life ● Division of profits 18 CHAPTER 10

©2013 Cengage Learning. All Rights Reserved. Business Management, 13e Limited Partnerships ● Limited partnership—partnership with at least one general partner who has unlimited liability and at least one limited partner whose liability is limited to his or her investment. 19 CHAPTER 10

©2013 Cengage Learning. All Rights Reserved. Business Management, 13e Businesses Suited to Partnership ● More than one kind of product or service ● More than one location ● Extended operating hours ● Professional services 20 CHAPTER 10

©2013 Cengage Learning. All Rights Reserved. Business Management, 13e ©2013 Cengage Learning. All Rights Reserved. Balance Sheets for Proprietorships 21 CHAPTER 10 © Cengage Learning 2013.

©2013 Cengage Learning. All Rights Reserved. Business Management, 13e ©2013 Cengage Learning. All Rights Reserved. Balance Sheet for a Partnership 22 CHAPTER 10 © Cengage Learning 2013.

©2013 Cengage Learning. All Rights Reserved. Business Management, 13e Checkpoint ● What are the disadvantages of a partnership? CHAPTER 10 23

©2013 Cengage Learning. All Rights Reserved. Business Management, 13e Checkpoint ● What are the disadvantages of a partnership? ● Unlimited financial liability ● Partnership disagreement ● Partners bound by contracts ● Uncertain life of business ● Limited sources of capital ● Unsatisfactory divisions of profits ● Difficulty withdrawing from partnership CHAPTER 10 24

©2013 Cengage Learning. All Rights Reserved. Business Management, 13e Corporate Forms of Business Ownership GOALS ● Explain the basic structure of a corporation. ● Describe how a corporation is formed and organized. ● Explain the management issues of corporations. 25 CHAPTER 10

©2013 Cengage Learning. All Rights Reserved. Business Management, 13e The Structure of Corporations ● Basic features ● Stockholders ● Directors ● Officers ● Charter (Certificate of incorporation) ● Close and open corporations ● Does not offer shares of stock to public ● Offers shares of stock to public 26 CHAPTER 10

©2013 Cengage Learning. All Rights Reserved. Business Management, 13e Checkpoint ● List the three key groups of a corporation? CHAPTER 10 27

©2013 Cengage Learning. All Rights Reserved. Business Management, 13e Checkpoint ● List the three key groups of a corporation? ● Stockholders ● Directors ● Officers CHAPTER 10 28

©2013 Cengage Learning. All Rights Reserved. Business Management, 13e Formation of Corporations ● Preparing the certificate of incorporation ● Stating the purpose of the business ● Investing in the business ● Paying incorporation costs ● Operating the new corporation ● Getting organized ● Handling voting rights 29 CHAPTER 10

©2013 Cengage Learning. All Rights Reserved. Business Management, 13e ©2013 Cengage Learning. All Rights Reserved. Organization Chart for a Corporation 30 CHAPTER 10

©2013 Cengage Learning. All Rights Reserved. Business Management, 13e Management Issues for Corporations ● Sources of capital ● Limited liability ● Permanency of existence ● Ease in transferring ownership ● Taxation ● Government regulations and reports ● Stockholders’ records ● Charter restrictions ● Agency dilemma 31 CHAPTER 10

©2013 Cengage Learning. All Rights Reserved. Business Management, 13e ©2013 Cengage Learning. All Rights Reserved. Balance Sheet for a Corporation 32 CHAPTER 10 © Cengage Learning 2013.

©2013 Cengage Learning. All Rights Reserved. Business Management, 13e Checkpoint ● What are the disadvantages of the corporate form of ownership? CHAPTER 10 33

©2013 Cengage Learning. All Rights Reserved. Business Management, 13e Checkpoint ● What are the disadvantages of the corporate form of ownership? ● Taxed twice ● Comply with strict government regulations ● Maintain records ● Charters restrict their activities CHAPTER 10 34

©2013 Cengage Learning. All Rights Reserved. Business Management, 13e Specialized Types of Organizations GOALS ● Describe organizations that are specialized alliances between companies or individuals. ● Describe specialized forms of corporations formed for tax or nonprofit reasons. 35 CHAPTER 10

©2013 Cengage Learning. All Rights Reserved. Business Management, 13e Organizational Alliances ● Limited liability partnerships (LLP) ● Partners liability is limited to his or her investment in the partnership ● Accounting Firms, legal firms ● Joint ventures ● An agreement among two or more business to work together to provide a good or service ● Two contractors to connect two cities by building a tunnel ● Cooperative ● Popular in agriculture for buying and selling crops 36 CHAPTER 10

©2013 Cengage Learning. All Rights Reserved. Business Management, 13e Checkpoint ● Describe the difference between the three types of organizational alliances? CHAPTER 10 37

©2013 Cengage Learning. All Rights Reserved. Business Management, 13e Checkpoint ● Describe the difference between the three types of organizational alliances? ● LLPs has limited liabilities ● JVs are an agreement between two or more businesses to work together ● Cooperatives are businesses owned by user- members CHAPTER 10 38

©2013 Cengage Learning. All Rights Reserved. Business Management, 13e Specialized Forms of Corporations ● Limited liability company (LLC) ● Taxed as if it was a proprietorship or partnership ● Supchapter S ● Nonprofit corporations ● Does not pay taxes ● Does not make a profit ● Quasi-public corporations ● Important to society but lacks profit potential to attract private investors operated by government 39 CHAPTER 10

©2013 Cengage Learning. All Rights Reserved. Business Management, 13e Checkpoint ● What is the main advantage of choosing an LLC or Supchapter S status? CHAPTER 10 40

©2013 Cengage Learning. All Rights Reserved. Business Management, 13e Checkpoint ● What is the main advantage of choosing an LLC or Supchapter S status? ● These forms have limited liability and but are taxed like a partnership. CHAPTER 10 41