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Chapter 4

BUS 201 - Chapter 4 - Small Businesses, New Ventures, and Entrepreneurship.pdf

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Business Administration
BUS 201
Andrew Gemino

Bus 201 Week 4 – Full Notes Small Business, New Ventures and Entrepreneurship Learning Objectives: - Describe the role of small and new businesses in the Canadian economy - Explain the meaning and interrelationship of the terms small business, new venture creation, and entrepreneurship. - Explain the entrepreneurial process and describe its three key elements. - Describe three alternative strategies for becoming a business owner. - Describe four forms of legal organization for a business and discuss the advantages and disadvantages of each. - Identify four key reasons for the success or failure of small businesses. Small Business: an owner-managed business with less than 100 employees Medium Business: 100 to 499 employees SME: small and medium sized enterprises Microbusiness: an owner-managed business with less than 5 employees Main Source of Job Creation: • Leaders in innovation and new technology • Service sectors • High-knowledge industries (high technology and biotechnology) Four Forms of Business Organizations 1. Sole Proprietorship: owned and operated by one person 2. Partnership:two or more individuals combining resources 3. Corporation: separate legal entity, liable for own debts 4. Cooperatives: organized, owned and controlled by users of its products/services Type of Organization Advantages Disadvantages Sole Proprietorship - Freedom - Unlimited liability - Simplicity - Lack of continuity - Low start-up costs - Difficult to raise money - Tax benefits - Reliance on one individual Partnership (frequently used) - Larger talent pool - Unlimited liability - Larger money pool - Lack of continuity General Partners - Actively involved in management - Ease of formation - Ownership transfer - Have unlimited liability - Tax benefits difficult - Must be at least one - Potential conflict Limited Partners - Not actively involved in management - Liability limited to their investment Corporations - Limited liability - Start-up costs - Legal status as a separate entity - Continuity - Double taxation (liable for own debts) - Professional - Regulations - Owner’s liability is limited to management - Stockholder revolts investment - Easier to raise - Property rights and obligation money - Indefinite lifespan Cooperatives - Limited Liability - No incentive for members - Organization formed to benefit its - Continuity to invest owners in forms of reduced prices and - Control is shared - Democratic voting and distribution of surpluses - No double taxation patronage dividends may - Each member has one vote not be attractive to entrepreneurs CORPORATIONS - Stockholders: investors who buy shares of ownerships (stocks) o Real owners of the corporation o May share in profits through dividends - Board of Directors: governing body of the corporation o Responsible for interests of shareholders o Appoint management, set policy, make major decisions  Inside directors = employees  Outside directors = not employees - Canadian Business Corporation Act: if operating in more than one province o (draw up articles of incorporation) - Provincial Corporation Acts o If operating in only one province - Must use Limited (Ltd.), Incorporated (Inc.), or Corporation (Corp.) in name - British firms use PLC and German firms use AG Types of Cooperatives  Consumer, Financial, Insurance, Marketing, Service, Housing The Entrepreneurial Process Entrepreneurship: process of identifying an opportunity in the marketplace and capitalizing on it Entrepreneur: person who recognizes and seizes opportunities  In all kinds of firms, not just new Intrapreneur: creates something new within an existing organization Who can be an Entrepreneur?  Are not born but are developed through experiences.  Wide demographic (old/young, male/female, high income/low income)  Based on “what they do” not “who they are” o Identify opportunities o Access resources  Reasons for Success: o Hard work, drive, and dedication  willing to put in time and effort
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