Download Advantages of Sole Proprietorships

WHY ARE THERE
BUSINESS FIRMS?
The incentive to earn an income,
coupled with a demand for goods and
services, creates a willingness to start a
firm.
A firm can provide income, self-worth,
and community needs.
THE ROLE OF
ENTREPRENEURS
Entrepreneurs
can be inventors
and/or
innovators.
What makes a good
entrepreneur?
WHAT MAKES A SUCCESSFUL
ENTREPRENEUR
• Visionary— sees a business opportunity when others may not
• Innovative— transforms ideas into new products, processes,
or businesses
• Willing to take risks— puts savings and reputation on the line
by starting a new venture
• Optimistic— is realistic but confident of business success;
• Self-motivated— is disciplined and persistent willing, and able
to solve problems
• Attentive— learns from experts, colleagues, and customers
and recognizes and adapts to market conditions
• Organized— coordinates and manages resources efficiently
IMAGINE YOU’RE AN
ENTREPRENEUR
“The Tutor Shop”
1. How would you earn revenue?
2. Would you collect a fee from the tutor after each session
with a student?
3. Would you charge the tutors a one- time fee when you
first connect them to each student?
4. How would you find and recruit good tutors?
5. How would you inform those who need tutors about the
service?
SOLE PROPRIETORSHIPS
A sole proprietorship is a business firm
owned by one person, the proprietor.
How to Start a Sole Proprietorship
1. Register the name of your business
2. Check and conform to regulations
3. Obtain any necessary licenses and permits.
4. Keep records and prepare tax forms.
SOLE PROPRIETORSHIPS
Advantages of Sole
Proprietorships
1. Easy start- up
2. Ease of decision
making
3. Ownership of profits
4. Tax benefits
5. Intrinsic rewards
Disadvantages of Sole
Proprietorships
1. Burden of responsibility
2. Difficulty raising funds
3. Unlimited liability
PARTNERSHIPS
A partnership is a for-profit business firm
owned by two or more people, called partners,
each of whom has a financial interest in the
business.
Small businesses like retail stores, restaurants
and contractors may operate as partnership.
Large law firms, medical practices and
business consulting firms will most often be
organized as partnerships.
PARTNERSHIPS
Advantages of
Partnerships
Disadvantages of
Partnerships
1. Larger pool of financing
2. Shared decision making.
1. Unlimited liability for general
partners
2. Disagreements among
partners
Corporations
A corporation is a business firm that is
itself a legal entity.
• Owned by stockholders who purchase stock.
The shares of stock represent ownership.
• A private corporation is owned by one
person or a small group of individuals.
• Public corporations are held by many
people and can be freely bought and sold.
Corporations
Advantages of
Corporations
Disadvantages of
Corporations
1. Limited liability for
stockholders
1. Expensive start- up costs
2. Ability to raise funds by
issuing shares
3. Low nonmonetary rewards
3. Ability to raise funds by
issuing bonds
5. Tax treatment
4. Rapid growth
2. Delays in decision making
4. Divided ownership of profits
6. More reporting requirements
THE THREE MAJOR BUSINESS TYPES:
AN OVERVIEW
COMPARING THE COMMON TYPES
OF BUSINESS ORGANIZATIONS
OTHER TYPES OF BUSINESS
ORGANIZATIONS
A limited liability company (LLC) is a hybrid business
organization that combines features of corporations,
partnerships, and sole proprietorships.
A business franchise consists of a parent company and
numerous associated businesses that sell a standardized good
or service.
A cooperative, or coop, is a business owned by its members and
operated to supply members and others with goods and
services.
A nonprofit organization is a legal entity formed to carry out a
“not- for- profit” mission.
GROWTH FROM
REINVESTING PROFITS
GROWTH FROM
OUTSIDE FUNDING
A firm can borrow funds by:
…issuing and selling bond
…issuing and selling new
shares of stock.
MERGERS AND
ACQUISITIONS
• A merger occurs when two firms legally join
together to form a single, larger firm.
• An acquisition is the purchase by one firm of a
controlling interest in another firm.
A horizontal merger combines two firms that produce
the same type of product.
A vertical merger combines firms that operate at
different stages in the production of a good.
MERGERS AND
ACQUISITIONS
A conglomerate is a single business enterprise formed by
combining firms from unrelated industries.
GOING GLOBAL
A multinational corporation is a company that
operates in more than one country.
GOING GLOBAL
THE VALUE OF
“DOING RIGHT”
Business ethics is the examination of
standards for “right” and “wrong”
behavior by firms.
Business Ethics in the 2000s:
-Corporate Scandals
-Financial Crisis of 2008
BUSINESS ETHICS
AT THE FIRM
Ethical businesses do the following…
• Develop a clear vision of company values
and mission
• Publish a “code” of business conduct
• Conduct ethics training programs
• Reward employees who exhibit ethical
behaviors
• Obey national and international laws.
CORPORATE SOCIAL RESPONSIBILITY
IN THE GLOBAL ECONOMY
Globalization is the broadening access to
products, people, businesses, technology, ideas,
and money across national borders to create a
more integrated and interdependent global
economy.
Corporate social responsibility (CSR) refers to the
duties and obligations corporations have to
different stakeholders.