BC

Entrepreneurship, risk, and types of bussiness ownership

  • Entrepreneurs risk both their time and capital when starting a business

  • Most entrepreneurial ventures are more risky than investing in the stock or bonds market, so they expect additional reward for accepting that risk.

  • Contrary to prospect theory (which states that humans typically fear loss more than gain), entrepreneurs tend to have a fear of missing out on opportunities that exceeds their fears of loss/ failure.

  • Entrepreneurs are comfortable with ambiguity. When entering a business opportunity, entrepreneurs do not have the goal, destination, or business model in mind. They expect that the final business product will be discovered over time through the collection of data and customer discovery to alter their original business idea.

  • This entrepreneurial mindset can exist in any business venture from a high growth start-up, linear growth small business, a huge corporation, etc. 

In terms of in class learning, this week was spent exploring the different forms of business ownership and their impact on taxes and liability. We compared sole proprietorships, partnerships, and corporations, emphasizing how these choices affect personal liability, profit distribution, and the way taxes are applied (income tax, corporate tax, and capital gains tax). We also discussed why people are drawn to entrepreneurship despite the risks, identifying attributes of successful entrepreneurs such as resilience, adaptability, and risk tolerance.

We highlighted the importance of small businesses to the American economy, recognizing that while they fuel innovation and job creation, they also face significant challenges that often lead to failure (such as poor management, lack of capital, or inadequate planning). We also discussed the distribution of companies, specifically corporations which make up around 20% of businesses but over 80% of receipts. On the investment side, we reviewed the three benefits of owning stock—decision influence, profit sharing, and gain realization—and using the cow example, clarified the difference between a profit and a gain.