Chapter 5 Proprietorships and Partnerships 1 Chapter 5 Proprietorships and Partnerships ©2008 Thomson/South-Western

Chapter 5 Proprietorships and Partnerships 2 Lesson 5.1 Entrepreneurship Goals Describe the characteristics of successful entrepreneurs. Discuss the responsibilities of owning your own business.

Chapter 5 Proprietorships and Partnerships 3 Characteristics of Entrepreneurs Self-starters Energetic Independent Take-charge Creative Personable Experienced Well informed

Chapter 5 Proprietorships and Partnerships 4 Getting a Business Started Business plan Government support – Small Business Administration (SBA) Responsibilities of business ownership Intrapreneurs

Chapter 5 Proprietorships and Partnerships 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 Elements of a Business Plan 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 6 Lesson 5.2 Proprietorship Explain the advantages and disadvantages of proprietorships. Describe the types of businesses suited to being proprietorships.

Chapter 5 Proprietorships and Partnerships 7 Proprietorship 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 8 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 9 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 10 Lesson 5.3 Partnership Goals Explain advantages and disadvantages of partnerships. Describe the types of businesses suited to the partnership form of business.

Chapter 5 Proprietorships and Partnerships 11 Partnership 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 12 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 13 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