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

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

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

4. 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

5. Chapter 5 Proprietorships and Partnerships
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

6. 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

7. 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

8. Chapter 5 Proprietorships and Partnerships
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

9. 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

10. 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
Chapter 5 Proprietorships and Partnerships