Chapters 5 & 6

Describe the characteristics of successful

entrepreneurs

Discuss responsibilities of owning your

own business

Explain advantages/disadvantages of

partnerships

Describe the types of businesses suited to

the partnership form of business

Recall: A person who assumes the risk of

starting, owning, and operating a business

for PROFIT

Often invest months/years before earning

profit

½ of all new business end within the first

five to six years

How many people own businesses?

Qualities:

Self-starters

Take charge

Creative thinking

Community leaders

Obtain work experience in the industry

Well-informed about financial, marketing,

and legal matters

To start your own business you need:• Adequate funds

• General knowledge about business

• Some work experience

• A business opportunity

• A BUSINESS PLAN - written document that

describes the nature of the business, its goals and

objectives and how they will be achieved

• **most important step in starting a business

Page 114 in textbook

Sole Proprietorship: Most common form of business organization

Owned and managed by 1 person – the “Proprietor”

• Performs day-to-day tasks with help of hired

employees

• Furnishes expertise, $, and management

• Is entitled to ALL PROFIT

• Creditors have full claim to the assets/property if

business is in debt

Business owned by 2 or more people

Once partnership is formed (p122-123)1. Partnership Agreement should be drafted

2. Balance Sheet – combined assets/liabilities

Determine responsibilities• Silent partner- no active part

• Secret partner- not known to public

Around 1.6 Million

Partnerships in U.S.

Sole Proprietorship vs.

Partnership

Owner is Boss

Owner receives all PROFITS

Owner personally knows employees and

customers – develops close relationships

Owner can make quick decisions

Owner is free from ‘red tape’ – lots of legal

documents or gov’t restrictions

Pay LESS income tax than Corporation

Owner may lack necessary skills/abilities

Owner may lack funds

Owner bears all LOSSES

Illness or death may close the business

Personal services• Dentists

• Barbers

• Landscapers

• Carpenters

Those which sell merchandise/services on a small scale• Family restaurants

• Newspaper stands

• Small grocery stores

Do not require a large amount of CAPITAL

Business owned by 2 or more people

Once partnership is formed (p122-123)1. Partnership Agreement should be drafted

2. Balance Sheet – combined assets/liabilities

Determine responsibilities• Silent partner- no active part

• Secret partner- not known to public

Around 1.6 Million

Partnerships in U.S.

Skills & abilities are pooled togetherMore Capital Credit position improved Contribution of Goodwill improved↑ed concern in business managementLower tax burden than corporationsReduced competitionOperating more efficiently by

combining 2 or more businesses

Unlimited financial liability

Disagreement among partners

Each partner bound by contract of others

Uncertain life

Limited sources of capital

Unsatisfactory division of profits

Difficulty withdrawing from partnership

More than one kind of product or service• Car dealership- sales / service depts

Operates in more than 1 location

Operates more than 8 hours/day

Popular with professional services• Lawyers (Schwebel, Goetz & Seiben)

• Doctors

• Accountants

• Financial consultants