Chapter 5 Proprietorships and Partnerships

Characteristics of Successful Entrepreneurs

Independent, creative, experienced, energetic, self-starters, personable, well-informed, and take-charge.

Responsibilities of Owning a Business

Creating a budget, especially focusing on advertising and marketing to increase profits.

Advantages of Proprietorships

Owner receives all profits and generally pays less income tax than corporations.

Types of Businesses Suited for Proprietorships

Small-scale businesses such as dentists, pool cleaners, and mechanics.

Advantages of Partnerships

Increased capital, lower tax burden compared to proprietorships, pooled skills and abilities.

Disadvantages of Partnerships

Unlimited financial liability, disagreement among partners, uncertain life.

Elements of a Business Plan

Includes nature of the business, detailed description of products/services, risk estimation, goals, marketing plan, financial plan, and organizational plan.

Proprietorship

A business owned and managed by one person entitled to all profits.

Disadvantages of Proprietorships

Owner may lack skills, funds, bears all losses, and illness can close the business.

Partnership

A business owned by two or more people, which can be general or limited regarding liability.

Limited Partnership

Liability of each partner is restricted to their investment amount.

General Partnership

Each partner is personally liable for all debts incurred by the partnership.

Tax Rate for Proprietorships

Generally between 12-30%, affecting how much the owner pays based on their income.

Business Plan

A blueprint detailing all specifics related to starting and operating a business.

Marketing Plan

Outlines customers, demand, pricing, and competitive comparison for products/services.

Financial Plan

Includes investment needed, projected income/expenses, and cash flow requirements.

Organizational Plan

Covers legal ownership, job descriptions, and physical facilities needed for the business.

Advantages of Proprietorship

Owner is boss, quickly makes decisions, knows customers personally, and less red tape.

Disadvantages of Partnerships

Includes difficulty in withdrawing, limitations on capital, and dissatisfaction in profit distribution.