1. Entrepreneurship and starting a small business
Chap 5

2. Learning Objectives
Explain the traits a successful entrepreneur possesses.
Discuss the types of business ownership and the advantages and disadvantages of each.
Describe the alternatives to starting your business from scratch.

3. Introduction to entrepreneurship
Entrepreneurship is a great way to apply your business skills to making a business out of a hobby, or out of a passion or some special skill a person possess.
Entrepreneurship needs – commitment and proper preparation to be able start your business.
Turn a passion into a business.

4. What does it take to be an Entrepreneur?
Entrepreneurship possess a huge power in the creation of jobs in the economy.
Some entrepreneurships grow to become millionaires,
E.g – amazon.com
Google
Codak …etc

5. What does it take to be an Entrepreneur?
There are common characteristics that all successful entrepreneurs have in common:
Self-directed
Self-nurturing
Action-oriented
Highly energetic
Tolerant of uncertainty

6. What does it take to be an Entrepreneur?
Most entrepreneurs use the flashlight approach to get innovations i.e. they would search every where for new ideas, and once they find an idea they would immediately a doubt it in the business.

7. What does it take to be an Entrepreneur?
Even though opening your own business could be risky, still many people do it for following reasons:
Opportunity
Profit
Independence
Challenge

8. What does it take to be an Entrepreneur?
Opportunity – to share in your dream to own your own business
You have initiative and drive to work long hours to make your business successful
More opportunities to work for yourself

9. What does it take to be an Entrepreneur?
Profit
What you earn after expenses and another reason that people take the Entrepreneurial challenge
Independence because you do not enjoy working for someone else
Challenge
More than the excitement of taking a gamble, reaching achievements is another reason people take the Entrepreneurial challenge

10. Types of Business Ownership
Sole Proprietorship
This is a form of ownership that involves one individual – it is the easiest kind of business to start and some one who starts a sole proprietor is an entrepreneur
A sole proprietor is one person running a business, it is the name given to a person who owns a sole proprietorship

11. Sole Proprietorship Advantages Disadvantages
Easy to start, easy out; you are your our own boss; you retain all profit; and no special federal taxes
Disadvantages
Limited financial resources; skill gaps; unlimited liability; lack of fringe benefits; a limited lifespan

12. Partnerships
This is the second type of business ownership and is a legal form of business with two or more owners
There are several types of partnerships:
- General partnership
- Limited partnership
Master limited partnership

13. Partnerships General partnership
a partnership in which all owners share in operating the business and in assuming liability for the business’s debts
Every partnership must have at least one general partner

14. Partnerships
Limited partnership is a partnership with one or more general partners and one or more limited partners
General partner is an owner who has unlimited liability and is active in managing the firm
A limited partner is an owner who invests money in the business but does not have any management responsibility or liability for losses
Limited liability means that limited partners are not responsible for the debts of the business, beyond the amount of their investment—their liability is limited to the amount they put into the company; their personal assets are not at risk

15. Partnerships Master limited partnership
Structured much like a corporation in that it acts like a corporation and is traded on the stock exchanges like a corporation, but taxed like a partnership and thus avoids the corporate income tax

16. Partnerships
Many states are now allowing partners to form a limited liability partnership (LLP). LLPs limit partners’ risk of losing their personal assets to only their own acts and omissions, and to the acts and omissions or people under their supervision

17. Partnerships Advantages of Partnerships
More financial resources when two or more individuals can contribute of the business.
There is pooled knowledge – one partner may be very good at building web sites and another may be good at marketing the business.

18. Partnerships Disadvantage of partnership
The division of profits – profits in a partnership must be divided between the partners
Because of unlimited liability each general partner is liable for the debts of the firm, no matter who was responsible for causing those debts
Conflict among the partners may arise - spending and how to run the business may cause conflict between partners
A partnership agreement should be spelled out in writing, in order to protect all parties

19. Corporations Corporate governance
This refers to the process, customs, policies, laws and institutions affecting the way in which a corporation is directed, administered or controlled.
Board of directors is the group ultimately responsible for the business.

20. Corporations
Conventional (C) corporation – this is a form of business ownership that provides limited liability – it is a state chartered legal entity with the authority to act and have liability separate from its owners

21. corporations
S-corporation – this is a type of legal entity in which the biggest advantage is that it is taxed like a sole proprietorship.

22. Corporations Limited Liability Corporations
Ownership rules are flexible; cannot sell stock; more paperwork; double taxation

23. Advantages and disadvantages of Corporations
may issue shares of stock to attract investors
corporate income splitting may help lower overall tax liability
Disadvantages
double taxation of corporate profits and shareholder dividends
must hold annual meetings and record minutes
S Corporations have restrictions on number of owners

24. Franchises and Cooperatives
Franchising is an attractive entry form into
Global business
Domestically, franchising is a well sought out alternative as well to starting your business from scratch: 7-Eleven, Holiday Inn, McDonald’s
A franchise is different from a chain store
A franchise is not a legal form of business but rather a type of business

25. Franchising Advantages of franchising Established product
Financial assistance
Lower failure rate
disadvantages of franchising
Large start-up costs
Must share profit
Tight restrictions

26. Franchises and Cooperatives
Buying an Existing Business
Another option to start a business is to purchase an existing business.
The advantage of purchasing this business is that there is already a customer base, inventory, and physical structure and location.
Often, the previous owner is willing to stay awhile and train new owners.

27. Franchises and Cooperatives
This is a business owned and controlled by the people who use it – producers, consumers, or workers with similar needs who pool their resources for mutual gain
They can be found selling electricity, healthcare, housing, food, financial services, etc