entrepreneurs and business organizations chapter 9 1
TRANSCRIPT
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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
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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
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Successful Entrepreneurs are/have…
Ambitious
Self-confident
Willing to take risks
Energy and self-discipline
Perseverance
Problem-solving skills
Organizational skills
Ability to motivate others
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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.
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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
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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
8Sole 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
9Partnerships
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
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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
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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
12Corporations
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
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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
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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
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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
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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
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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
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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