The story of 5 entrepreneurs…
Business Management
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Compare the characteristics of
different types of business ownership
and organization in both servicebased and product-based businesses.
Explain the risks and rewards of
entrepreneurship through a SWOT
analysis.
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Students will define
entrepreneurship.
Students will
examine similarities
and differences in
the characteristics
of business
ownership.
Objective
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What is
entrepreneurship?
What are the key
differences
between sole
proprietorships,
partnerships, and
corporations.
Essential Questions
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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.
What personality traits, qualities, or
skills are needed in order to be a
successful entrepreneur?
Risk taker
 Decision maker
 Hard worker
 Ambitious
 Goal setter
 Enjoys challenges
 Can adapt to changes
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Strengths
Weaknesses
Opportunities
Threats
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The Nature of Business
Types of Business Activities
Types of Businesses
Activity: Investing in Shares of Stock
Next Class: LLCs, S-Corp, Joint Venture and
Franchises
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An organization that produces or
distributes a good or service for
profit is called a business.
Profit – the difference between
earned income and costs – is the
goal of business ownership!
Every business engages in at least three major
activities.
1.
Production making a product or providing a
service
2.
Marketing activities between the business and
customers (buying / selling)
3.
Finance deals with all of the money matters
involved in running a business
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Produce goods used
by other businesses
or organizations to
make things
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Mining coal
Extracting oil
Constructing buildings
Building businesses
Manufacturing airplanes
Assembling televisions
Growing crops / raising
livestock
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Sell products or
services to the end
consumer
What are some
examples of
commercial
businesses who:
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sell a product?
provide a service?
deal in finance?
engage in marketing?
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Service Businesses – type of
commercial business that use mostly
labor to offer intangible products to
satisfy consumer needs
Industry – refers to all businesses within
a category that do similar work (i.e.,
the automotive industry)
Service Businesses
Industries
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Sole
Proprietorship
Partnership
Corporation
Organizational
Alliances
Franchise
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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.).
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Owner is boss
Owner receives all
profits
Personally know
employees &
customers
Makes all decisions
Advantages
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May lack
necessary skills &
abilities
May lack funding
Owner bears all
losses (unlimited
liability)
Business ends upon
death of the owner
Disadvantages
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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.
Skills & abilities
pooled
 Sources of
capital increase
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◦ Investment
◦ Credit
Advantages
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Unlimited liability
Disagreement
among partners
Partners share risk
◦ May be held responsible
for partner’s mistakes
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Difficulty in
withdrawing from
partnership
Disadvantages
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Small businesses provide 55% of jobs.
There are 1/2 million businesses started
each year – only the strong survive!
Within the first three years, one out of
every four to five businesses will close.
About half cease operations within 6
to 7 years.
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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.
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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.
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Available sources of
capital
Limited liability of
stockholders
Permanency of
existence
Ease in transferring
ownership
Advantages
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Double taxation
◦ Company taxed on income
◦ Stockholders taxed on
profits
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Government regulations
Complex business to run
◦ Stockholders’ records
◦ Charter restrictions
Disadvantages
Complete the worksheet using
the website listed.
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Find your new seats. Zero complaining!
Missing assignments
Other types of corporations with notes
◦ You have the notes, I will give you the answers
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Bulls or Bears project
◦ Overview
◦ Grading
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Next class: finish project franchising
LLC
S-corporations
Nonprofit corporations
Quasi-public corporations
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Also known as LLC
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Relatively new form of ownership
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Hybrid of a partnership and
corporation
◦ Owners protected from personal liability
◦ Profits / losses pass directly to owners
without taxation to the company itself
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Small business that is taxed
like a partnership or sole
proprietorship but has up to
35 shareholders
 Does
not pay taxes, does not exist
to make a profit
 In the United States, nonprofits
provide nearly 1/3 of the GDP.
 Examples include:
◦ Loudoun County Public Schools
◦ United Way
◦ Educational Testing Service (the SATs)
◦ Hospitals
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Businesses that are important to society but lack the
profit potential to attract investors
Usually operated by local, state, or federal
government
Government provides financial support (subsidy)
Government imposes regulatory controls
Examples include:
◦ Interstate highways (Massachusetts & PA turnpike … stateowned)
◦ Local water & sewer systems (Loudoun Water)
◦ Los Angeles County Museum of Art
Joint Venture
Cooperatives
Agreement among two or more
businesses to work together to provide
a good or a service
 Each business shares the costs of doing
business as well as the profits
 Many web-based companies rely
extensively on joint ventures.
 Also commonly seen when businesses
expand into foreign countries
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Business owned and operated by its
user-members for the purpose of
supplying themselves with goods
and services
 Operates similarly to a corporation
(stockholders, charter)
 Provides members with cost and
profit advantages
 Popular in agriculture for buying &
selling crops
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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.
Advantages
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Owner receives
thorough business
training
Uses a tested
management system
Owner is guaranteed
a certain geographic
area
Usually widely
recognized names
Disadvantages
High initial cost
 Owner has to
follow strict rules
and regulations
 Judged by
performance of
peers
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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.
THE END