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 You tube examples Muffin Milk 4:14 muffinmilk Web site

Chapter 5 Proprietorships and Partnerships 4 Characteristics of Entrepreneurs Self-starters Energetic Independent Take-charge Creative Personable Experienced Well informed

Chapter 5 Proprietorships and Partnerships 5 Getting a Business Started Business plan – road map of where you are going. Government support – Small Business Administration (SBA) – Small Business Development Center (SBDC)

Chapter 5 Proprietorships and Partnerships 6 Getting a Business Started Responsibilities of business ownership Expenses, customers, fees for insurance, taxes, equipment, hiring people OR 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 8 Lesson 5.2 Proprietorship/Finance Explain the advantages and disadvantages of proprietorships. Describe the types of businesses suited to being proprietorships.

Chapter 5 Proprietorships and Partnerships 9 Entrepreneur Video Football Entrepreneur

Chapter 5 Proprietorships and Partnerships 10 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 11 Balance Sheet - Finance + - ASSETS = Liabilities +Owners Equity

Chapter 5 Proprietorships and Partnerships 12 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 13 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 14 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 15 Homework due Friday Work on Case study 5-1 page 133 Case Study 5-2 page 134 Focus on Ben and Jerry’s page 129 Group Activity 2 page 44 - Student Activity Guide 5F from Student Activity Guide page 40 Answers are to be typed and presented orally to the class on Friday and hand in work. 50 points. Due on Friday

Chapter 5 Proprietorships and Partnerships 16 Grading Assessed on completeness Team work with individual grades Knowledge of subject matter Innovative solutions Being focused answering all questions

Chapter 5 Proprietorships and Partnerships 17 Partnership Partnership — business owned by two or more people Bob BettyBill

Chapter 5 Proprietorships and Partnerships 18 Balance Sheet for partnership ASSETS = Liabilities + Capital

Chapter 5 Proprietorships and Partnerships 19 Partnership General partnership — each partner is personally liable for all debts incurred by partnership Debt = 10,000 to each person Limited partnership — liability of each partner is restricted to amount of partner’s investment Partner 1 = $6, Partner 2 = $3, Partner 3 = $1,000.00

Chapter 5 Proprietorships and Partnerships 20 Partnership Silent partner — known but takes no part in management. Secret partner not known to the public and does participate in management.

Chapter 5 Proprietorships and Partnerships 21 Partnership Dormant partner — neither known nor active part in management.

Chapter 5 Proprietorships and Partnerships 22 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 23 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 24 Business name for a Partnership Can not use “and Company” or Co. like Jones, Smith and Co. Alicea & Roman Associates, Accountants Dechert Price & Rhoads Law Firm Court Reporters, CT