1. Understanding Entrepreneurship and Small Business
Chapter 3
Understanding Entrepreneurship and Small Business
PowerPoint Presentation by Charlie Cook
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2. Key Topics Small business and its importance in the economy
Entrepreneurship versus small business
Starting and funding a small business
Sole proprietorships, partnerships, and corporations
Creating and managing corporations
Corporate trends and issues
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3. What Is “Small Business”?
Independently owned and managed business that does not dominate its market
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4. Small business plays a critical role in the U.S. economy.
Job Creation
Innovation
Importance to Big Businesses
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5. “Entrepreneurs are simply those who understand that there is little difference between obstacle and opportunity and are able to turn both to their advantage.” —Victor Kiam
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6. Entrepreneurship vs. Small Business
Accepts the risks and opportunities of creating, operating and growing a new business.
Small Business Owner:
Does not have plans for growth.
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7. Buying an Existing Business
Getting Started
Buying an Existing Business
Starting From Scratch
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8. Financing the Small Business
Personal resources
Loans
Venture capital companies
Small-business investment companies
Small Business Association (SBA)
Financial aid and management advice
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9. Franchising: An Ownership Opportunity
Advantages
Proven business
opportunity
Access to
management
expertise
Disadvantages
Start-up costs
On-going payments
Management rules
and restrictions
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10. Trends in Small Business Start-ups
Emergence of
E-commerce
Crossovers From
Big Business
Opportunities for Minorities & Women
Global
Opportunities
Increased
Survival Rates
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11. Reasons for Success and Failure
Poor management
Neglect
Weak control systems
Insufficient capital
Success
Hard work, drive, dedication
Market demand
Strong management
Luck!!!
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12. Sole Proprietorships Advantages: Disadvantages: Freedom Simple to form
Low start up costs
Tax benefits
Disadvantages:
Unlimited Liability
Limited resources
Limited fundraising capability
Lack of continuity
Unlimited Liability
Legal principle holding owners responsible for paying off all debts of a business
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13. Partnerships Advantages: Disadvantages: More talent and money
More fundraising capability
Relatively easy to form
Tax benefits
Disadvantages:
Unlimited liability
Disagreements among partners
Lack of continuity
Unlimited Liability
Legal principle holding owners responsible for paying off all debts of a business
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14. What is a Corporation?
“An artificial being, invisible, intangible, and existing only in contemplation of the law.”
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15. Corporations Advantages: Disadvantages: Limited Liability Continuity
Stronger fundraising capability
Disadvantages:
Double taxation
Fluid control
Complicated and expensive to form
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16. Types of Corporations Closely Held (Private) Corporation
Publicly Held (Public) Corporation
Subchapter S Corporation
Limited Liability Corporation (LLC)
Professional Corporation
Multinational or Transnational Corporation
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17. Corporate Governance Hierarchy
Stockholders
Board of Directors
Officers
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18. Stockholders: Owners of Corporations
Stock: A share of ownership in a corporation
Common Stock
Preferred Stock
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19. Special Issues in Corporate Ownership
Joint Ventures and Strategic Alliances
Employee Stock Ownership Programs (ESOPS)
Institutional Ownership
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20. Special Issues in Corporate Ownership
Mergers and Acquisitions (M&As)
Mergers & Acquisitions (M&As)
Divestitures and Spin-offs
Divestitures & Spin-offs
Divestitures & Spin-offs
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21. Three Forms of Business
Business Form
Liability
Continuity
Management
Investment Sources
Proprietorship
Personal, limited
Ends with death or decision of owner
Personal, unrestricted
Personal
General Partnership
Personal, unlimited
Ends with death or decision of any partner
Unrestricted or depends on partnership agreement
Personal by partner(s)
Corporation
Capital invested
As stated in charter, perpetual or for specified period of years
Under control of board of directors, which is selected by stockholders
Purchase of stock
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22. Chapter Review
Define small business and explain its importance to the U.S. economy.
Distinguish between entrepreneurship and small business.
Describe the start-up decisions made by small businesses and the potential sources of financial aid and management advice.
Describe sole proprietorships, partnerships, and corporations, and explain the advantages and disadvantages of each.
Identify the different types of corporations.
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