Entrepreneurship Final Exam Review

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Need scantron and pencil
3-4 questions on Wyly
3-4 questions on videos shown in class
2 questions on guest lecture (nonIP)
Plus PPts
Importance of entrepreneurship to the economy
* Small firms provide 60-80 percent of net new jobs and account for >50% of U.S. innovations * About 97 percent of U.S. exporters are small businesses with fewer than 500 employees * Based on research, ACQUIRED SKILLS ARE MORE IMPORTANT that specific inherent traits Entrepreneurial characteristics

* Visionary; creative; innovative|
* Adaptable; problem-solver; results oriented |
* Persuasive; inspirational|
* Confident; determined; a self-believer |
* Competitive; ambitious; one who perseveres |
* Honest|
* Disciplined; hard working|
* Organized; a planner; a decision-maker|
* Understanding|
* Leader; team player |
* Networker/Sociable/Interpersonal Skills |
* Opportunistic|

Six Dominant Themes
1. Commitment and Determination (Persistence)
2. Leadership (Persuasion_
3. Opportunity Obsession (Passion)
4. Tolerance of Risk, Ambiguity and Uncertainty
5. Creativity, Self-Reliance, and Adaptability (Resourcefulness) 6. Motivation to succeed (Action
Organizational forms of business and tradeoffs
Three basic legal forms of business:
1. Sole Proprietorship: A business owned and managed by a single person ADVANTAGES:
* ~70% of all businesses, ~ 4% of revenue
* Simple, Flexible, Least Expensive
* Pays no tax –Owner not separate from entity
* Owner gets to keep all of the profits after paying personal income taxes * Salary not deductible as expense (wages to employees are deductible) * Less gov’t regulation
* No tax
* Ease of dessolution
DISADVANTAGES:
* unlimited liability,
* difficult getting capital,
* losses your fault,
* harder to hire,
* personal time commitment

2. Partnership: two or more individuals who agree to operate a business together ADVANTAGES: ease of info, availability of capital, diverse skills, flexibility, less gov’t, no special taxes DISADVANTAGES: unlimited liability for GP, potential conflict, profit-sharing, exiting of dissolusion of partnership 3. Corporation (C corporation): an entity regulated by statute and treated as a separate legal entity for liability and tax purposes 75% OF BUSINESSES * Legal entities with an existence and life separate from its owners * Owners are not personally liable for the entity’s debts * A corporation is chartered by the state in which it is formed and can own property, enter into contracts, sue and be sued, and engage in business operations under the terms of its charter * In the U.S., corporations account for less than 20% of all businesses but more than 80% of all sales

Other forms of business:
S-Corporation
ADVANTAGES:
* Gains/losses = personal income/loss
* Limited Liability Protection
* No minimum tax
* Stock transferable
* Stock = Voting or non-voting
* Cash method of accounting
* Long-term capital gains/losses passed through to shareholders DISADVANTAGES:
* Some Restrictions For Qualificatios
* Most Fringe Benefits Not Deductible For Shareholders * Must Have Calendar Tax Year
* 1 Class Of Stock
* Net Loss Limited to Shareholder’s Stock Plus Loans To Business * No More Than 100 Shareholders, US citizens
Limited liability company (LLC)
ADVANGTAGES:
* Partnership/Corporation Hybrid, Laws Differ From State To State * Has Members
* No Shares Issued, Each Member’s Ownership determined by Articles of Incorporation * Taxed based on the way you set the LLC up, but flows through to the owners similar to a partnership * Standard Term = 30 Years, Continuity Restricted

DISADVANTAGES:
* Most States do not tax LLCs, except for Texas and Pennsylvania * Ownership not...
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