1. Entrepreneurs and Business Organizations Chapter 9 1

2. What is an entrepreneur? Entrepreneur: a person or group who invests, creates, or takes on the risk of starting a new business or company. Or, they might have an idea that they think they can profit from. Entrepreneurs affect or help the economy by: Creating jobs Meeting consumer demand for products/services increasing economic growth 2

3. What characteristics would you look for in an entrepreneur? Take a few moments are write down 4 characteristics in the space provided on your note sheet 3

4. Successful Entrepreneurs are/have… 4 Ambitious Self-confident Willing to take risks Energy and self-discipline Perseverance Problem-solving skills Organizational skills Ability to motivate others

5. WHAT DO YOU THINK THE RISKS ARE FOR STARTING A BUSINESS? WHAT ABOUT THE REWARDS? Take some time and think to yourself what these things can be. Then get with a buddy and share your thoughts. 5

6. Risks and Rewards of Starting a Business Risks Failure Raising the money for the company Financial insecurity Hiring the right employees Long hours Little to no pay Rewards Potential for increased pay or profit Freedom in your life Enjoyment of your hobby as your profession Be your own boss 6

7. 3 Main Types of Businesses Sole Proprietorship: a business owned and managed by one person. Partnership: a business owned by two or more co-owners who share profits. Corporation: owned by public or private shareholders who own stock 7

8. Sole Proprietorship Advantages Easy start-up Little paperwork Business name, permits, licenses Few restrictions Make all decisions Keep profits File individual taxes No business taxes Easy to close down Disadvantages Unlimited liability You pay all losses Personally responsible for all debt Create LLCs for protection Limited Liability Company Limited growth potential Limited life 8

9. Partnerships Partnerships have 2 or more owners who share the profits and liabilities of the company. Common partnerships include: Family owned business Law firms Medical practices 9

10. Different Types of Partnerships General Partnerships (GP): all owners share total liability for debts and are involved in all decisions Limited Partnership: there is at least one general partner and at least one limited partner. Limited partner: referred to as a “silent partner”. This person contributes financial capital (money) to the business but does not have a say in day-to-day operations. They only lose what they invest. Limited Liability Partnership (LLP): owners act like GPs but have limited liability 10

11. Advantages and Disadvantages of Partnerships Advantages Easy start- up, just need legal agreement: Articles of rules and regulation Few restrictions Share decision-making power Opportunities for specialization File individual taxes Larger growth potential Banks more willing to loan out to multiple partners Disadvantages Unlimited liability for GP Conflict between partners Continuity issues Partners may die or leave the business 11

12. Corporations A business becomes a corporation when it is owned by shareholders who purchased shares of the company’s stock. Venture Capitalist: someone who invests money into a new promising business and receives share of ownership of the company. They provide capital (money) so that a company can grow its business 12

13. Two Types of Corporations Privately Owned: owned by one person or a very small group. Stocks sold to a select group of people Publically Owned: offers stock to the general public and has many shareholders 13

14. Multinational Corporations Corporations have business in multiple countries 14

15. Advantages and Disadvantages of Corporations Advantages Limited liability Shareholders only lose what they invest Larger growth potential Professional management Long business life Disadvantages Complex start up Loss of control Board of directors make decisions, business founder Increased government regulation Stockholder meetings required Double taxation Business pays taxes as well as shareholders 15

16. Franchises, Cooperatives, and Non-Profits Franchise: In which one company has many individual outlets to sell its products or services Cooperatives: business that is owned and operated by a group of individuals for their shared benefit. The goal is to make goods and services more affordable, not to make a profit. Must have some sort of membership to take advantage of shared benefits. Non-profit: Functions like a business aside from the fact that making a profit is not the goal. They are established to support a public or private goal. Foundations, associations, booster clubs 16

17. Advantages and disadvantages of Franchises Advantages Company expands with each new franchise Cheaper for the company to open new locations itself New owners receive a support system Better chances for profit A customer base already exists Disadvantages Must pay fees to open the franchise Must pay royalties (on top of usual costs of operations) Lack of independence in terms of running the business 17

18. Rights and Responsibilities of Businesses Rights Right to advertise Hire and fire employees Screen employees Be compensated for property lost Govt must pay for property they take Right to protect intellectual property Trademarks, patents Responsibilities Obtain permits and licenses Pay taxes Deal honestly Honor contracts Create an equal opportunity workplace Produce safe products Protect whistle-blowers 18

19. Business Ethics: Legal vs. Ethical There are things that companies are legally able to do, but this does not mean that they should do those things. Morality is starting to play a big role in the business market. Do you notice a growing trend in companies appealing to your morals? Corporate Responsibility: taking responsibility for a company’s actions that impact Corporate Citizen: something that business strive to be by being considerate of the interests of their stakeholders (those who have an interest in or are affected by a company’s actions) Business Ethics: ways in which companies address corporate responsibility. They are principles that guide the actions of the company and its employees. Business Ethics: What not to do 19

20. Must Think About the Consumers Consumer Sovereignty: power of consumers to affect the decisions of a company. Consumers communicate their power through their spending. What consumers spend their money shows what they want. 20