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ENTREPRENEURSHIP
Chapter 33
WHAT IS ENTREPRENEURSHIP The process of starting and managing
your own business
Entrepreneurs – are people who organize, manage, and take a risk to own a businessExamples: Henry Ford – Ford Company
Ray Kroc – McDonalds Bette Graham – Liquid Paper Terri Tuttle - Baxters Tyler Megargel – Crayola Coloring Sheets
RISKS OF ENTREPRENEURSHIP? Losing money – your investment
No guarantee for success: Lots of time and effort
MAIN ADVANTAGES OF ENTREPRENEURSHIP Personal freedom – Not controlled by
anyone else, can set own schedules
Personal satisfaction – Doing what you enjoy
Increased income – rewards for hard work
Increased self-esteem – From being successful
DISADVANTAGES OF ENTREPRENEURSHIPS Potential loss of income – could lose
money
Long and irregular hours
Necessity for strong self-discipline –
May have to do tedious, time-consuming tasks such as cleaning, answering phones, paperwork
WHY IS ENTREPRENEURSHIP IMPORTANT TO OUR ECONOMY??? Small businesses provide 55% of jobs for
our labor force Small businesses produce 50% of the
Gross Domestic Product (goods and services produced in the U.S. using our labor and property)
Offer consumers choices of goods and services
Improve products and processes Challenge existing businesses to become
better Generates jobs
CHARACTERISTICS OF SOLE PROPRIETORSHIP Owned and operated by one person The most common form of business
ownership Approximately 70% of all U.S.
businesses fall into this category
ADVANTAGES OF SOLE PROPRIETORSHIP Gets to keep all of the profits Relatively easy to start Get to make all business decisions on own
Taxed less than any other business
More freedom from government regulation
DISADVANTAGES OF SOLE PROPRIETORSHIP Unlimited liability – you have all of the
responsibility for the debt Limited assets such as money to
reinvest in business Making all of decisions can be hard
PARTNERSHIP Characteristics – legal agreement
between 2 or more people to start a business
Only 10% of businesses in U.S. Should have a partnership agreement –
done by an attorney
TYPES OF PARTNERSHIP
General Partnership – each partner shares in the profits and losses (unlimited liability)
Limited Partnership – each partner is limited for any debts only up to the amount of investment; Limited partners typically have no voice in the decisions of the business
ADVANTAGES OF PARTNERSHIP Combines the skills of the owners Have more money to work with Taxed less heavily than a corporation
DISADVANTAGES OF PARTNERSHIP Owners may not always agree Partners actions are legally
binding on other partners Business is dissolved if one
partner dies
CORPORATION Characteristics:
Business that is chartered by the state
Legally operates apart from the owner or owners
Most complicatedHave a board of directors who make decisions for the corporation
STOCKHOLDERS People who actually have ownership in
the corporation and have limited liability
Stock – unit of ownership in the corporation
ADVANTAGES OF CORPORATION Owners have limited liability Easier for corporation to raise money People can easily enter and leave the
business Each operation area is typically
professionally managed
DISADVANTAGES OF CORPORATION Complex to form Increased government regulation
Higher taxes on profits Intricate accounting and record keeping
LEGAL STEPS TO STARTING A BUSINESS Sole proprietorships and partnerships -
File for a “Doing Business As” (DBA) – your county government recognizes that your business exists.
Corporations – File for “Articles of Incorporation” – with securities bureau in state department of commerce (name, address, purpose, directors, and amount of stock to each director)
LEGAL STEPS (CONT.) Local licenses – zoning ordinances,
building codes, safety standards
Obtain a state license – protects people from unqualified people practicing in a business Examples: Doctors, accountants,
cosmetologists, barbers, marriage counselors, and pharmacists
FRANCHISES An agreement to operate a business in
the name of a recognized companyFranchisee – the person purchasing the
franchiseFranchisor – the owner of the franchiseMust run the franchise per the franchisor’s
specifications
http://www.culvers.com/franchise/how.aspx
http://www.steaknshakefranchise.com/costs-and-qualifications-requirement-information.php