Entrepreneurs and Business Organizations
Entrepreneurs and Business Organizations
ENTREPRENEURS AND
BUSINESS ORGANIZATIONS
HOW DO ENTREPRENEURS USE THEIR RESOURCES TO START BUSINESSES?
Objectives:
Describe how risks and rewards influence the decisions of entrepreneurs.
Analyze the advantages and disadvantages of organizing a business as a sole proprietorship, partnership, or corporation.
Synthesize industry-specific data to create and present a plan for a new business.
Compare and contrast the rights and responsibilities of businesses.
Examine the challenges and rewards of being an entrepreneur.
WHAT DOES IT TAKE TO START A NEW BUSINESS?
Entrepreneurs play a critical role in the economy because they start businesses that meet consumer demand, create jobs and spur economic growth.
Running a business can bring great rewards, such as personal satisfaction and being one’s own boss. Entrepreneurs also face challenges, such as the risk of failure.
WHAT KINDS OF BUSINESSES ARE BEST ORGANIZED AS SOLE PROPRIETORSHIPS?
A sole proprietorship is a business owned and managed by one person. The owner makes the profits and is personally responsible for the debts.
Advantages:
ease of start-up
few restrictions
full decision making power/responsibility
profits
individual taxation
Disadvantages:
unlimited liability
limited growth potential
limited life
WHAT KINDS OF BUSINESSES ARE ORGANIZED AS PARTNERSHIPS?
In a partnership, two or more owners own and operate a business together. In most cases, they share the profits and the liability.
Advantages:
ease of start-up
few restrictions
shared decision-making power
specialization by partners
individual taxation
increased growth potential
Disadvantages:
unlimited liability for some partners
conflict between partners
keeping continuity if a partner leaves
WHY ARE LARGE BUSINESSES ORGANIZED AS CORPORATIONS?
A corporation is a business owned by shareholders who have limited liability in the firm’s debts. It is a legal entity that can conduct business affairs in its name.
Advantages:
Limited liability
Greater growth potential
Professional management
Long life
Disadvantages:
Complexity of start-up
Loss of owner control
Greater government regulation
Tax on profits at the corporate and shareholder levels
A multinational corporation operates in more than one country. It offers such advantages as access to global markets and diversification of operations.
WHAT PURPOSES ARE SERVED BY FRANCHISES, COOPERATIVES, AND NON-PROFIT ORGANIZATIONS?
In a business franchise, a parent company (franchiser) grants to an independent business owner (franchisee) the exclusive right to use its trade name and sell its products in a designated location
A cooperative is a business that is owned and operated by a group of individuals for their shared benefit. Examples include credit unions and agricultural co-ops...and health insurers!
A nonprofit organization functions mostly like a business, though it does not operate to make a profit. It is established to support a particular private or public goal.
WHAT RIGHTS AND RESPONSIBILITIES DO BUSINESSES HAVE IN A FREE ENTERPRISE SYSTEM?
In a free enterprise system, businesses have many of the rights individuals have, such as freedom of speech. They also have legal obligations, such as paying taxes.
Business ethics are the notions of right and wrong that guide the decisions and actions of a company and its employees. Studies show that consumers reward good corporate conduct and respond unfavorably to unethical behavior.