Entrepreneurship: Owning Your Own Business
Focus Questions What are four advantages of being an entrepreneur? What are three forms of business organization? What is a limited liability company (LLC)?
Components of the American Economy Entrepreneurship the skills related to organizing, managing, and taking on the risks of owning a business. Land natural resources Labor Capital money uses to purchase all of the equipment and materials to run a business
Entrepreneurs plan, organize, and manage their businesses, expecting to earn profits.
Advantages of Entrepreneurship Being the boss and owning your company can be very satisfying You can set your work hours You make all the decisions Financial security You can leave the business to children or others
Disadvantages Is there a big enough market? You need a business plan Not a nine to five job Great chance of failure
Do you have what it takes? How well do you plan and organize? How good are you making decisions? How well do you get along with different personalities? Do you have the physical and emotional stamina to run a business?
How will the business affect your family? Are you willing to keep an open mind and keep on learning? Do you have the passion to stick with it and make it work?
Types of Business Opportunities Take over a family business Purchase an existing business Start your own business Purchase a franchise
A franchise is a legal contract that allows you to operate a business in the name of a recognized company The company is known as the franchisor Franchisee the person who operates a franchise
Forms of Business Organizations Sole Proprietorship a business owned by one person Simple tax form (Schedule C) Pay both employee’s and employer’s portion of FICA and Medicare Responsible for business related obligations
Partnerships Partnerships a business co – owned by two or more individuals General partners share assets, profits, liabilities (debts and obligations of the business), voting rights, and management responsibilities
Limited partners do not have voting rights and they are not held responsible for company liabilities beyond the amount of their investment
Silent partners invest in the company but have no say in its management
A partnership agreement defines the type of relationship and spells out the details
Advantages of Partnerships over Sole Proprietorship Easier to raise capital More expertise and greater range of knowledge As easy to set up Costs, risks, and workload are shared
Disadvantages of Partnerships All general partners are liable for the debts and obligations Partners may disagree about management and operational procedures Partners may have different business goals or time frames Potential for personal disputes
Corporations A legal entity that can own property, acquire debt, sue, and be sued Stockholders and a board of directors own the corporation and control its business Stockholders’ liability is limited to the amount of their investment
Ownership is transferred by buying or selling stock A corporation may enter into contracts, obtain loans, and continue to exist even after its stockholders die or transfer their shares to others
Unless limited by its articles of incorporation (the primary rules governing the management of a corporation) or by state law, a corporation continues indefinitely
Limited Liability Company (LLC) New type of corporate arrangement (not a true corporation) Owners have limited personal liability for the debts and actions of the company
Steps in Forming a Corporation File articles of incorporation with the state where you wish to incorporate Write bylaws that govern its operation Hold a meeting of the board of directors Issue stock to stockholders
Finally a corporation has to meet standards of bookkeeping, maintain its own bank accounts, and the accounts of their employees