Business Ownership Introduction to Business & Marketing
Objectives • Define entrepreneurship. • Understand the importance of small businesses in the economy. • Identify the major types of business ownership. • Compare advantages and disadvantages of the different types of business ownership.
Entrepreneurship • Entrepreneurship is the process of starting and managing your own business. • An entrepreneur is someone who attempts to earn money and make profits by taking the risk of owning and operating their business.
Think About It… • Who are some famous entrepreneurs that you know? What business did they start? • Who are some entrepreneurs you know personally? What business did they start? • WHY do you think these people decided to start their own business?
Entrepreneurship Advantages Disadvantages • Personal freedom • Personal satisfaction • Potential for increased income • Risk / potential of loss • Long, irregular hours • Need for daily discipline
Think About It… What personality traits, qualities, or skills are needed in order to be a successful entrepreneur?
Characteristics of Entrepreneurs • Risk taker • Decision maker • Hard worker • Ambitious • Goal setter • Enjoys challenges • Can adapt to changes
Types of Business Ownership • Sole Proprietorship • Partnership • Corporation • Limited Liability Company (LLC)
Importance of Small Business • Small businesses provide 55% of jobs. • There are 1/2 million business started each year – only the strong survive!
Sole Proprietorships • About 3/4 of all businesses in the United States are sole proprietorships. • A sole proprietorship is a business owned by one person. • Sole proprietors usually have a special skill by which they can earn a living (i.e. plumbers, contractors, wedding planners, etc.).
Sole Proprietorships Advantages Disadvantages • Easy to start up • Able to make all decisions for the business • Keep all profits • Unlimited liability • Limited access to credit or financing • Owner may not have all the skills or expertise necessary • Business dissolves when the owner dies
Partnerships • A partnership is a business owned by two or more people who share its risks and rewards. • A partnership agreement outlines the rights and responsibilities of each partner.
Partnerships Advantages Disadvantages • Easy to start up • Easier to obtain money • Each partner contributes • Bank more likely to lend • Each partner brings different skills and talents to the business • All partners share risk • May be held responsible for partner’s mistakes • Unlimited liability • Personality conflicts can affect decision making
Corporations • A corporation is a company that is registered by a state and operates apart from its owners. • The owner must get a corporate charter (business license) from the state where the main office will be located. • To raise money, the owners can sell stock (shares in the company) to stockholders. • The company must have a board of directors to govern the corporation.
Did You Know? • Most “big name” businesses are corporations. • Only 15 – 20 percent of all businesses in the United States are corporations. • Corporations are responsible for 80% of all business that is conducted in the United States.
Corporations Advantages Disadvantages • Limited liability • Owners are only responsible for the capital they invested • Easy to raise money by selling stock • Business continues after owner’s death • Professionally managed (hire experts) • Double taxation • Company pays tax on income • Stockholders pay tax on profits • More government regulations • Difficult and costly to start • Complex business to run
Sweet WebQuest! Candy Companies & Types of Businesses
Subchapter S Corporation • One type of corporation • Small business that is taxed like a partnership or sole proprietorship but has up to 35 shareholders
Limited Liability Company • Also known as LLC • Relatively new form of ownership • Hybrid of a partnership and corporation • Owners protected from personal liability • Profits / losses pass directly to owners without taxation to the company itself
Franchises • A franchise is a legal agreement to use the name and sell the products of a parent company in a designated geographic area. • Franchisee: person who buys the rights to operate the business • Franchisor: recognized company that allows independent owners to use their name • The franchisee pays the franchisor an annual fee and a share of the profits.
Franchises Advantages Disadvantages • Owner receives thorough business training • Uses a tested management system • Owner is guaranteed a certain geographic area • Usually widely recognized names • High initial cost • Owner has to follow strict rules and regulations • Judged by performance of peers
Did You Know? • Many businesses start as one form of business ownership, but move into other forms later. • Example: Ben & Jerry’s started as a partnership, became a Subchapter S Corporation, and then eventually became the corporation we know today.
Top 10 Franchises Online Article with Worksheet