Class Notes (839,394)
Canada (511,324)
Administration (2,738)
ADM1300 (206)

ADM1300 - ch 6 and 5 - entrepreneurship.docx

10 Pages

Course Code
Matthew Archibald

This preview shows pages 1,2 and half of page 3. Sign up to view the full 10 pages of the document.
September 16 , con’t Chapter 6&5 – Entrepreneurship & Options for Business Ownership Sole proprietorships, partnerships & corporations Chapter 6 – the entrepreneur, what is a business plan , how do we get money etc Chapter 5 – what are the types of business Both: expands beyond the textbook (value added for coming to class) The Entrepreneur - recognize & seize an opportunity – recognize seize an opp that exists in the marketplace to create a business. Different that someone who creates an invention. Entrepreneurs could create a business that someone else has already started (consulting, financial planning) but what makes you different? Find a niche in the marketplace, do it better than others ,etc - many characteristics  innovative, driven, risk takers, open-minded, not afraid to fail, passionate, you have to love what you are doing  if you don’t want to take a risk, chances are you won’t be an entrepreneur - strict process o idea – what is the idea all about, is there value, can you put it into action? o screening (adds value, competitive advantage, marketable, low exit costs)  value added: if the idea doesn’t add a value to a large-scale niche, you have to provide value-added to a large-scale consumer base.  Competitive advantage: What makes you better than anybody else  Low exit costs: if it doesn’t work out, will you go bankrupt getting out of the business. o Development  Develop the idea through business planning - develop a business plan  swat analysis  finance and budgeting – where are you getting your money from and what is the forecast  mission statement – what is your reason for existence  marketing plan  operational plan  The business plan also helps when you are trying to get financing – the bank or investors etc will want to see your plan.  It will also guide you in your business Why be an Entrepreneur? - Be your own boss o A lot of ppl don’t want to work for somebody else. This is the #1 reason why you would become an entrepreneur - Financial success o It could lead to financial success, but it is not guaranteed. It is certainly the ideal that you will have this - Job security o Maybe… but not always, because your business might go under. You get to decide if you will move forward or shut the business down… - Quality of life o It can provide a strong quality of life if it is successful. Generally when you start up your will not have any work-life balance to get things off the ground, and the hard work is constant until you can make it sustainable. - Do we agree? Where to get Money? - Personal, friends family o They may be more likely to loan (or give) you the money at lower interest rates or even for free - Debt financing – borrow money o Not as easy as it sounds. You normally have to have some assets in order to borrow money. o Probably not until your student loans are paid off and you are generating some sort of revenue - Equity financing –alow ppl to invest for ownership o Venture capitalists (VC), angel investors (dragon’s den) o Might have a business idea, can’t get money from the bank, so you seek others to invests in your business and in return you give up part of your ownership in your business (ie dragon’s den – they get money for 50% of the investment) Many resources available when you want to start or create your business to developing your business plan: - - - - And many many more Sole proprietorships - When management & ownership of a business are one and the same - Typically employ less than 50 ppl - The oldest form of legal ownership in Canada o Eg: house cleaning Advantages Disadvantages - Easy Startup: No registration required if under -Personally responsible for all losses – unlimited own name, if under another name it’s like 200$ liability you are absolutely liable as an individual to register . Once you make a certain amount of for all the debt of the business. money you would have to register your business o You may have to put up your (ie 30,000 in revenue) for a HST number house as collateral for loans o You are responsible for all the debt obligations of the business - - You get all the profit - Unlimited liability - Decisions happen quickly - Lack of continuity (uncertainty of duration) - Potential Tax advantages (pay only personal - Time commitment (to get it started and make income taxes – so if you aren’t making that sure it is successful, because you are the much money your tax rate will be very low, if at business) all. Once you start generating a lot of revenue, - Difficulty In raising monies (relying on your own you may switch to a incorporated business assets and savings) - Management limitations (as a manager, as the owner, you may not be strong / experts in all the managerial areas like accounting finance etc and the functions like PLO…) - Easy to form and dissolve -Management and ownership is one and the - Gov’t preferential treatment (provides money same. for certain industries, tax breaks etc.) -Disadvantage :decision making because you are - Sole claim on all profits (losses) the only one making decisions. No one to tell you - Personal incentive/satisfaction – your business, that you’ve got a crazy idea pride in ownership - Pays only personal income tax = federal and provincial… (more income, more tax) this is only an advantage in lower tax brackets, after which point you may reconsider your form of business - Secrecy Partnerships Lets get together and share in our managerial knowledge, financial abilities to operate a business When two or more people combine their financial, managerial andtechnical abilities to operate a business. Types: - General Partnership: all partners = unlimited liability o They are all responsible for the debt obligations of the business o All partners are active in the day to day operations of the business - Limited: one partner must have unlimited liability o The one or more partners (at least one)who are involved in the day to day ops of the business must have unlimited liability o Then you will have “limited partners” who are not involved in the day to day ops of the business. o The limited partner is only responsible for the amount of money that they invested in.  In Ontario, there are a certain industries like accountants or lawyers that can create what we call a limited liability partnership, which allows all the lawyers or accountants in that form to have limited liability, even though they are involved in the day to day operations of the business. (LLP) – we are all involved but we all have limited liability - Joint Venture: established for a specific project or a specific period of time. It is a partnership, but it may be a partnership between two corporations. o Example:  sony erikson combined expertise in telecommunications to create a partnership, which recently ended  Miller coors has a joint venture for particular brands of their beer  It could even be a home construction business that creates a partnership with home depot o It can often be renegotiated Advantages Disadvantages - Could have some limited liability - Responsible for mistakes of other partners - More capital to start up - One partner wants to leave? Or dies? - More specialized skills - Conflict of interest, where do we want the corp - More contacts / networking to go - Goal differences - Smaller share in profits -easy to form - Unlimited liability -larger availability of money - Distribution of profits -diversification of mgmt. skills (one person is good - Management difficulties (who has control at accounting the other in marketing or HR etc, over what, who makes decisions) business person partners with engineer (BTP) - Difficult to withdraw investment (very -shared risk ( complication when multiple ppl involved) -personal interest/ satisfaction (you still want the o Death business to do well) o Simple withdraw (if we are going -decision making (now you have 2 people making along, and I want to retire or I decisions, but might also be a disadvantage want to get out of this business) because you might hit heads in the decisions that o (If you decide to withdraw your you make, ie in a 50-50 partnership, who makes investment, but the company is the decision or breaks the tie so to speak?) now worth much more than the - initial investment. how do you decide how much money you should get? How much is your investment worth today, and should I get a share of future profits) Partnership agreement: create it when the partnership is started. Talks about issues like withdrawal. It is revisited and modified as necessary. Not always easy to do because when we go into business with our friends (which statistically isn’t a good idea). Sometimes you just sort of start without thinking about the partnership agreement. It outlines all the attributes of the business, explains whatever you want to explain, how the business is going to be setup, who owns what, who is responsible for what. - Maybe the one partner is the “face” of the business, so if that partner leaves, even if they were only a 50% partner, they may lose a lot of business. Corporations - An artificial being existing only in the eyes of the law (same rights & obligations as a person) – right to sue or be sued, the right to own property) - A legal entity whose assets and liabilities are separate from owners – shareholders are the people that own the corporation. As shareholders we are separate from whatever the organization owns (assets) and owes (liab) - Articles of incorporation must be drawn o Name and address of corporation o Objectives of corporation o Type/number of shares to be issued o Number of directors Control of the corporation - Shareholders - Board of directors - Sr management (CEO, VP, President etc) The Shareholders - Owners of the corporation - Share = unit of ownership; anyone can be an owner of a corporation - Basically there are two classifications of shareholders - Types: common & preferred o Common: have voting rights, but don’t rec preferential treatment regardinging dividends (more risk, higher gain) o Preferred: no voting rights, claim to dividends before common (les risk, guaranteed dividends) o Dividend: percentage of profits paid to shareholder. Doesn’t necessarily relate to the value of a particular share. Banks that pay out dividends that means that they are profitable because they are paying dividends, it doesn’t necessarily mean that their share price is going up. In the case of scotiabank, the value of shares (units of owner
More Less
Unlock Document

Only pages 1,2 and half of page 3 are available for preview. Some parts have been intentionally blurred.

Unlock Document
You're Reading a Preview

Unlock to view full version

Unlock Document

Log In


Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.