Remember: Entrepreneurs: the ability to coordinate the factors of production AND the willingness to take risks. Heart of the American Economy- pump billions How about working from home or school?

Quick Stats 25-30% fail in first year 50% over three years

Decision Time Do you want to be able to set your own hours? Do you like solving problems? Do you like the idea that the amount of time and effort you invest=the amount of money you make? Do you think competition is fun? Do you have good will power when it comes to work- will you work when no one is making you? Do you plan ahead, manage time well? Can you set and meet personal goals? Are you responsible enough that others can depend on you?

Think Like an Entrepreneur 1. Recognize a potential target audience 2. Determine what they need or wish 3. Organize time, efforts and others to meet these needs and wishes 4. Invest in necessary start-up costs, capital goods and other factors of production. 5. Hire, lead and manage those under you. 6. Attract, please and fulfill the needs and wishes of consumers. 7. Break even, pay off debt, make a profit, pay employees, pay gov’t taxes and insurance

CH 7 Objectives 1. Identify forms of business ownership 2. List the advantages and disadvantages of each

Quick Review Type of business organizations discussed are those found in capitalist systems. Often referred to as Free Enterprise or Private enterprise –Indiv. Free to own and operate firms free of excessive gov’t controls.

Sole Proprietorship Compose 75% of all business firms in America Owned by one owner

Sole Proprietorship Advantages 1. Freedom to enter and exit the market easily 2. Freedom from outside control 3. Freedom to retain information 4. Freedom from paying excessive taxes- personal income tax level 5. Freedom from being an employee- self-employed Disadvantages 1. Unlimited personal financial liability- pay financial debts from own pocket 2. Limited management and employee skills as well as limited time (strain on family, finances etc.) 3. Limited life span of the firm 4. Limited availability of money

Sole Proprietorship Opportunity to reflect the love, ethics and responsibility of the Christian faith Not always possible when one is an employee

Partnership (AKA General Partnership) An enterprise with two or more persons as the owner. Least popular business form and constitutes less than 10% of business firms

Partnership Advantages 1. Greater management skills 2. greater possibility of keeping content employees 3. greater access to financing 4. ease of formation Freedom to manage Disadvantages 1. Unlimited personal financial liability 2. uncertain life 3. potential conflicts between partners

Partnerships Just as scriptures says it is difficult to serve two masters so to is running a partnership. Innate selfishness and pride can ruin the unity. Two forms: –A. General partnership: equal voice in decision-making –B. Limited Partnership: one general partner ad one limited partner because the amount of his investment limits his decision-making and personal financial responsibility.

Partnerships and Scripture 1. Unequal yoking- 2 Cor. 6:14 –Where are the goals, values and ethics drawn from. Might share differing worldviews. 2. Surety (cosigning)- Prov. 11:15, Prov. 17:18, Prov. 22:26-27 –Act of becoming security for or pledging to undertake another’s debt. –Remember Dave Ramsey’s approach on this subject

Limited Liability Company LLC’s- combines benefits of corporation with those of a partnership. –Not liable for acts and debts of the LLC –Avoid corporate tax rates

Corporations A corporation is a separate entity (invisible and intangible) created and recognized by law independent from its owner. Important properties are immortality and individuality –May buy, sell, enter contracts, own, sue, be sued just like any legal person

Corporations Lawsuits against corporations common –Ford Motor Company –Fuel tank exploded- 3 killed –2004 awarded $12.5 million

Corporate Organizational Structure StockholdersBoard of DirectorsPresident (CEO)Senior Vice PresidentMiddle ManagersLine mangers (foreman)Employees

Types of Corporations 1. Private Corporations: Owned by private citizens

Types of Corporations 2. Public Corp. – general public owns and the gov’t manages

Ownership of Corporations Stock: one becomes a part owner of a business by buying shares in the company # of shares/# outstanding shares= degree of ownership Ex. 500,000/billion=half ownership

Corporations Advantages 1. Limited personal liability 2. experienced management and specialized workers Immortality Ease in raising financial capital Disadvantages Higher taxes- must pay corporate taxes Greater governmental regulation Lack of secrecy- Impersonal Rigidity