...CHAPTER 1 Introduction Rationale of the Study One of the first decisions you will need to make in starting a business is choosing a form of ownership. This section will lead you through your options and present the advantages and disadvantages of each (Hatten, 2006). When entrepreneurs establish a business, they must decide on the form of business ownership. There are different types of business ownership, and the type that is chosen can affect the profitability, risk, and value of the firm (Madura, 2004). Sole proprietorship, as the simple and easy to form type of business, is a business that is owned by one person. The vast majority of small business starts out as sole proprietorships. Sole proprietors own all the assets of the business and the profits generated by it. Most small business owners prefer the proprietorship because it is simple to enter, operate, and terminate and provides for relative freedom of action and control (Megginson, et al., 2000). On the other hand, partnership is defined as a voluntary association of two or more persons to carry on as co-owners of a business for profit. Like proprietorships, the law does not distinguish the business and its owners. The partner should have a legal agreement that sets forth how decisions will be made, how profits will be shared, how disputes will be resolved, how future partners will be admitted to the partnership, how partners can be bought out, and what steps will be taken to dissolve the partnership when...
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...and to stay above the rest of the market. As a financial advisor the writer of this paper will describe the advice they will give to the client for raising business capital, outlining the advantages and disadvantages to all options and explain the historical relationships between risk and return for common stocks versus corporate bonds. Describe Advice for Raising Capital As a business owner or operator it is always wise to look at all options to bring in new revenue or increase the capital in a company. It is in the financial advisor’s opinion to consider the following options: Microloans, Bank-Term Loans, Asset Based Loans or Small Business Administration Loans. Each one of these options will generate increased capital for the business. Microloans are small loans given to small business borrowers to help businesses have working capital, usually reaching up to $50,000 (Entrepreneur Media, Inc., 2014). An average Microloan is granted for around $13,000 dollars dependent upon each situation given. The advantage of this option is it is usually granted to those that have never borrowed from a bank. The disadvantage of this option is higher interest rates. Bank-Term Loans are the standard commercial loan, often used to pay for a major investment in the business or an acquisition (Entrepreneur Media, Inc., 2014). These loans have fixed rates and are classified as long-term or...
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...and raise productivity. An entrepreneur, therefore, is a person who organizes and manages a business, assuming the risk for the sake of potential return (Mariotti & Glackin, 2012). The entrepreneur is an innovator who brings about change through the introduction of new technological processes or products, and thus, through innovation, the entrepreneur is a “deliberate wrecker of equilibrium.” Successful entrepreneurship is associated with a high degree of practical intelligence, creative abilities, and business talent, characteristics which Shavinina (2006) refers to as “entrepreneurial giftedness” (p. 225)--talented individuals who exceptionally succeeded in business by creating new ventures. According to Darling, Gabrielsson, and Seristo (2007), entrepreneurial management leadership is all about “breaking new ground, going beyond the known, and helping to create the future.” Also, entrepreneurial management leadership is about helping people settle into new opportunities that give them joy and hope for the future. The keys to entrepreneurial success are not intelligence, education, lifestyle or background. Rather, entrepreneurial success is determined, in most part, by the entrepreneur’s “ability to effectively deal with opportunities through the dynamics of an organizational setting, thereby enabling the people concerned to be actively and enthusiastically involved and successful” (Darling, et al., 2007). Therefore, successful entrepreneurs are those who strive to establish...
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...and differences between them. Entrepreneurship continues to thrive in almost all corners of the world. Entrepreneurs are reshaping the business environment, creating a world in which their companies play an important role in the vitality of the global economy. But there is not always necessary to establish a company in order to implement new ideas. A great potential lies in applying business principles within existing organizations. Keywords: entrepreneurship, intrapreneurship, human capital, business, leadership JEL classification: L26 Introduction Why are entrepreneurs and intrapreneurs suddenly more important today than before? An explanation to this question would be that the world is changing nowadays more rapidly under the influence of new technologies. The increasing competition hinders our work. It does not suffice anymore to stand before our competitors simply driven by our will of competing; we have to bring something new to the market. Entrepreneurs and intrapreneurs play a decisive role as they help the company (newly established or existing) to engage in new business and enter new markets. The concept of entrepreneurship is seen as the process of uncovering and developing an opportunity to create value through innovation and seizing that opportunity without regard to either resources (human and capital) or the location of the entrepreneur – in a new or existing company (Churchill, 1992). 1 2 Investing in people! Ph.D. scholarship, Project...
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...Business Organization Entrepreneurs should write a business plan to help bring the idea of a new business venture. There are also regulations that should be followed when starting a business. The role that regulatory requirements play in the process of entrepreneurship within the health care field is, it provides a standard, or structured frame, which offers the entrepreneur the means to operate according to the law. This paper will define sole proprietorship, partnership, corporations, and limited liability companies, discuss the advantages and disadvantages of each, and discuss which the most important appropriate form of ownership is for an aggressive entrepreneurial firm. Define A sole proprietorship is defined as a form of business organization involving one person, and the person and the business are essentially the same. Sole proprietorships are the most predominant form of business organization. Partnership is defined as a form of business organization where two or more people pool their skills, abilities, and resources to run a business. A limited partnership is a modified form of a general partnership. The major difference between the two is that a limited partnership includes two classes of owners: general partners and limited partners. There are no limits on the number of general or limited partners permitted in a limited partnership. Similar to a general partnership, the general partners are liable for the debts and obligations of the partnership, but the limited...
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...control, tax matters, profit or loss of the business, re-investment issues, etc. There are several legal forms of business: sole proprietorship, partnership, limited liability partnership, Limited Liability Company, corporation, S corporation. Sole proprietorship In a first scenario a handyman who wants to get into business which will have little paper work and set up cost. The entrepreneur doesn’t have a partner and will be running the business alone. For this scenario the best business form will be sole partnership. This is a business with one owner which means the owner and business are inseparable. In other words the owner is the business and the business is the owner. The majority of small businesses start out as sole proprietorships because it has some advantages. • sole proprietorship is easy to form and operate • least expensive form of ownership to organize • owners are in complete control, and may make decisions by themselves • the owner receives all income generated by the business • it is easy dissolve the business, if it is desired. Of course this form of business has disadvantages too and the main is that as the business and the owner are inseparable, whoever sues the business in fact sues the owner. The owner is liable personally for the companies’ debts, and to pay company obligations the personal assets of owner can be taken. Partnership In the second scenario a family members or friends...
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...What are the advantages and disadvantages of entrepreneurship? Advantages of Entrepreneurs Excitement: compared to being regular employees, entrepreneurs enjoy much excitement beginning from the planning stage of the business up to development and realization. Thrill-seekers obviously love being entrepreneurs as they are exposed to too much risk. You should never forget, that all business risks that you agree on taking, should be calculated. Salary Potential: most people who are employed generally feel that they are not being compensated for the work they do. In addition, they must follow the salary structure set by their employers. Entrepreneurs, on the other hand, earn money that is commensurate to their efforts. Flexibility: having control of work schedules and commitments makes the life of these entrepreneurs enviable. They are able to take vacations anytime and spend much quality time with their families. Independence: for people who love the idea of not being answerable to anyone else but themselves, becoming an entrepreneur would surely be wonderful. They would be able to make decisions without the pressure of getting fired. Disadvantages of Entrepreneurs No Regular Salary: when you start a business, you should be prepared to leave behind the security of having a paycheck each month. Even successful entrepreneurs experience lean months when all financial resources are being taken up by the new business. Work Schedule: although they have the luxury of a flexible...
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...time and energy to the planning and startup phases of their business. Those activities include conducting research, creating a business plan, securing financing and marketing. Additionally, business owners also have to decide the type of business form that they would like to operate under. There are three main business structures in which entrepreneurs must establish their business. The following paper will detail the three business structures along with the advantages and disadvantages that each hold. Sole Proprietorships The first and most simple form of a business is a sole proprietorship. Within this form of business structure, the owner usually owns and manages all aspects of the business. Additionally, taxes are not paid on a sole proprietorship as a company; instead the owner pays taxes off of the income that is received from the business. As in all business structures, there are both advantages and disadvantages to operating as a sole proprietor. The advantages of sole proprietorships are minimal legal costs of formation; owners have absolute control over decision making and the ease of business sale. The disadvantages of sole proprietorships are all business decisions are the responsibility of the owner, lack of interest for investments and total liability of the business. Individuals that are seeking sole proprietorship would need to conduct a personal assessment to determine if they are fit to handle a business entirely on their own. Partnerships ...
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...Business Structures Fin/571 Business Structures This week we learned about the different business structures to consider when establishing a business. It is important to note the advantages and disadvantages of each business structure when planning a business. The main business structures include sole proprietorship, partnership, and corporation. Sole Proprietorship Sole proprietorship is a business owned by one person. It is the easiest, least expensive, and least regulated business structure to start. The advantage of a sole proprietor include not having to share the profits or control of business decisions with anyone else. However, the disadvantage is that sole proprietors have unlimited personal liability for the business debts and obligations. Partnership. A partnership business agreement legally formed with two or more owners. The agreement specifies the amount of capital each partner contributes, division of profits, the role of each partner, decision-making process, and transfer of ownership in specified events. The advantage of more than one owner is an increase in capital or borrowing capacity, added knowledge and skills from each of the partners. There are two types of partnerships general and limited. General Partnership-a disadvantage is unlimited liability of all the general partners, partners who manage the daily activities of the business, regardless of the amount of capital each contributed. Limited Partnership- partners, who are not...
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...Introduction The electronic reserve videos outlined what it takes to become an entrepreneur. An entrepreneur is the leader as well as the owner of their specific business. With becoming an entrepreneur comes planning and decision making and choosing a business structure being the first step to the decision making process. Sole proprietorship, partnership, and corporation are a couple of the main business structures that where mentioned in the videos. Sole proprietorship Sole proprietorship is the easiest and most popular form of business structure with a multitude of advantages and disadvantages. A plus is that a sole proprietorship is the simplest and least expensive form of business structure an individual can establish ("SBA.gov," 2014). In a sole proprietorship the owner of the business has complete and total control over all of the decisions made for the company without the interference of anyone else. In terms of taxes, the business is not separate from personal taxes with the rates being the lowest of all business structures. On the other hand, there are also disadvantages to a sole proprietorship. Because there is no separation between personal and business, the owner of the company is liable for all obligations and debts of the business with no exceptions. Therefore the sole proprietor alone has to take full responsibility for not only the success of the business but the failure as well. Partnership Unlike a sole proprietorship, a partnership has two...
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...hybrid form of Business organizations. The sole Proprietorship is owned by one person, and it’s the simplest way to start a business as it’s less regulated than other forms of business. Sole proprietor does not have to share the decision-making authority with anyone else and keeps the profits and the advantage of this form that the person subjected to lower income tax than other forms. The disadvantage that the business life ends by the death of the owner, and it’s hard to transfer the ownership of this form and it’s hard to raise the capital of this form of business, as the financing options for this form depending on entrepreneur equity contributions, lease and debt financing (ENTREPRENEUR, 2014). In partnerships, partners come together to manage a business through an agreement that determines the capital, the contribution of each partner in the capital, the role of each partner in the partnership, and the agreement can determine and extending the life of the partnership in case he founders leave. There are two types of partnerships: General and limited partnership. General Partnership has the same basic advantages and disadvantages as a sole proprietorship. A key disadvantage is that all partners have unlimited liability for the partnership's debts and actions, regardless of what portion of the business they own or...
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...Business Structure Business Structure Being your own boss or in other words owning your own business can have its advantages as well as its disadvantages. As an entrepreneur you are able to take control and direct the culture of your organization and determine what key factors will make your business successful and outdo the competition. The flexibility that you can establish is beneficial to being able to balance your work and personal life with family and friends; all while you are challenging yourself by the new opportunities that will constantly be presented and the creativity that goes along with it. More importantly establishing what type of business is the most important; sole proprietorship, partnership and or a corporation. A sole proprietorship, often being identified as one-person operation, is the most common business structure throughout the world. With a sole proprietorship you have complete control of your organization, making all decisions from your target market, employees, location, and so on. It is simple and easy to establish this type of business structure and the start-up cost are low as well. There are several disadvantage of this type of business structure. Personal liability is a major disadvantage because it is not separate from our business; meaning creditors can sue you directly. Another issue is the ability to raise money to start your business. Most lenders are fearful to financing sole proprietors simple because if the business fails no money...
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...income. As an entrepreneur, your goal in creating a new business is to satisfy a set of customers profitably and to sell enough goods or services to satisfy your ongoing fixed costs as well as recover your initial investment. Cost-volume-profit analysis is critical for an entrepreneur to use when starting a new business. Through cost-volume-profit analysis, an entrepreneur can set prices, determine if he or she wants to add another product line, or see if the company is spending too much producing its products. Cost-Volume-Profit (or "CVP") analysis is a way to understand a business opportunity in simplified terms to help you zero in on the right set of customers to serve while minimizing risk by keeping your costs and investment as low as possible. This will help you understand if your opportunity can reach breakeven and how long it will take to recover your sunk investment. . The following paper will share the cost volume profit concept and how this practice can help the entrepreneur when they establish a new business. Concept of CVP Analysis The CVP or cost volume profit analysis is a professional accounting technique that is related to the effect of sales volume and product costs on operating profit of a business. This analysis is used to determine the break-even point of the business in addition to provides a great help to managers and other business professionals to make short term economic decisions. CVP analysis provides managers with the advantage of being able...
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...Advantages of Internet Promotion The emergence of globalise trade, increase in foreign investment and cross-border transactions have put many small businesses under pressure to find innovative ways to continue to market their products and services. This is especially difficult given that they often operate on tight marketing budgets. In the quest for cheap marketing alternatives, these small businesses continue to use conventional marketing tools such as newspaper, magazine, radio and television advertisements, unaware of the advantages that Internet Promotion offers. All too often, these entrepreneurs focus on the disadvantages of Internet Promotion and fail to adequately take advantage of the opportunities that it presents. Moreover, their preoccupation with conventional marketing strategies is driven by a misconception that these are cheaper than Internet Promotion. (article continues below...) To most small business entrepreneurs, marketing or promoting their products or services via the Internet can be a daunting task. However, with adequate information small businesses can benefit significantly from Internet Promotion while minimising the disadvantages that it presents. In fact, it may prove to be the marketing strategy that generates the highest return on investment. Advantages of Internet Promotion Cost Effective and Enduring Marketing Strategies The Internet has become the information superhighway for the buying public. Most persons prefer the hassle free transactions...
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...Matheny University of Phoenix FIN/571 Instructor: Paul Stevens April 4, 2016 Business Structures The following will discuss the different business structures a person could create when deciding to start a business. Sole proprietorship, partnership or a corporation are the structures described below. This paper will cover some of the benefits and disadvantages each structure could pose and in what capacity one option may be more advantageous than another. Sole Proprietorship A sole proprietorship is a way for someone to start a business where he or she is the sole owner and controller of the company. One benefit is he or she will be the only decision maker. A second benefit is tax incentives such as filing expenses on their personal tax. Finally, sole proprietorship is the easiest to obtain because there is less involved in getting started. There are however disadvantages if something happens to the person. One disadvantage is the company will not be automatically passed down to the family. Also, if the individual is poor at managing debt, the individual’s personal assets could be seized to pay debtors (Entrepreneur Media, 2016). Partnership A partnership is a way for two or more people to go into business together. They can do this through a general partnership or a limited partnership. With a general partnership, all parties involved assume liability and share equal parts to the company. Benefits include less paperwork than a limited partnership. They also can...
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