Ch 5 proprietorship & partnerships

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Ch 5 proprietorship & partnerships

  1. 1. Chapters 5 & 6
  2. 2. 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
  3. 3. 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?
  4. 4. Qualities: Self-starters Take charge Creative thinking Community leaders Obtain work experience in the industry Well-informed about financial, marketing, and legal matters
  5. 5. 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
  6. 6. Page 114 in textbook
  7. 7. 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
  8. 8. 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.
  9. 9. Sole Proprietorship vs. Partnership
  10. 10. 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
  11. 11. Owner may lack necessary skills/abilities Owner may lack funds Owner bears all LOSSES Illness or death may close the business
  12. 12.  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
  13. 13. 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.
  14. 14. Skills & abilities are pooled together More Capital Credit position improved Contribution of Goodwill improved ↑ed concern in business management Lower tax burden than corporations Reduced competition Operating more efficiently by combining 2 or more businesses
  15. 15. 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
  16. 16. 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

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