ENTREPRENEURSHIP
Gabrielle Hinds.
Unit 2 module 1
As an entrepreneur i need to be aware of the issues associated in business ownership and
with having a business and deciding what type of venture i should take. I have to weigh
the risks and benefits of each type of venture and carefully consider stated issues before
deciding on the ownership decisions.
MODULE OUTLINE
Types of ventures
Legal and Regulatory Framework
Ethics and Social Responsibility
Guiding terms:
Non-corporate: organizations where the business and the owners are one and the same
the business is not a separate legal entity from the owner(s)
Corporation/Incorporated: the legal status of the organization and that of the owner(s)
are separate and distinct; the organization is a separate legal entity from the owners.
Unlimited Liability: the owner(s) of the business are liable or responsible for all debts and
obligations of the business. The liability can extend beyond his/her investment in the
business to personal assets.
Limited Liability: the owners(s) of the business are liable for liable for debts and
obligation of the business to the amount of their investment in the entity. His/Her
obligation is limited to the investment and liability does not go beyond this.
,Types of ventures
Sole trader
The sole trader or sole proprietor is a key form of a non-incorporated or non-corporate
business organization. This venture is owned and managed by one person. This individual
undertakes all risks for the business. Moreover, he/she makes all decisions in the
undertaking. Legally, the sole trader is responsible for all debts or obligations incurred in
the business. The sole trader/sole proprietor therefore has unlimited liability.
If the entrepreneur has to access loans facilities he or she will most times use personal
assets such as house or land as collateral to secure the loan. If the business fails or is
unable to repay the loan, the personal assets of the sole trader can be seized by the
lending institution.
Given that most sole traders are small or micro enterprises it is difficult to access funding
and the high level of risks associated with failure of these types of businesses usually
restricts growth and expansion of the business.
Legal Structure Advantages/Benefits Drawbacks/Risks
Sole Trader Low startup costs Owner bears all
(one owner) as venture is small risks and has
unlimited liability
Simple tax Does not enjoy tax
structure i.e benefits that
personal income corporations get
tax
Owner has control Difficulty in
over all decision accessing
making financing for
investment
Ease if formation of Assumes total
venture as venture responsibility for
is small and not the venture
-Examples of sole traders: complicated resulting in long
Plumbers
working hours
Electricians Owner has the sole Owner dies and
Mechanics right to shut down the business
Lawyers the venture if ceases to exist
Doctors necessary
Food vendors
Profits are enjoyed Limit to expertise
Shop owners
Independent
by the owner and skills
Carpenter available to
Landscapers venture
, Partnership (General and Limited)
A partnership is another form of a non-corporate or non-incorporated business.
Coulter(2003) describes the partnership as a form of business where two or more
business owners share the management and risk of the business. The partnership
ACT(Trinidad and Tobago): Ch 81.01(1914), states that a partnership is a relation which
subsists between persons carrying on a business in common with a view profit.
An ordinary OR general partnership can be categorized as those without a legal contract
and those with a formal partnership agreement or partnership deed (legal contract).
Partnerships that exist with the deed of partnership exist where the partners agree to a
legal contract. The main purpose of the partnership deed is to avoid grievances relating to
profits and distribution of responsibilities.
Hatten(1997), refers to this as ‘the articles of partnership’. This entitles the following information:
The obligations and responsibilities if each partner
Name of the partnership
Purpose of the partnership
Capital provided by each partner
Services/expertise provided by each partner
Decision making authority of each partner
Situations where consensual decision making is required
Duration of partnership
Distribution of profits and losses
Compensation for each partner
Dispute resolutions procedure
Procedure for adding new partner
Procedure for dissolution of the partner
Coulter (2003) describes a limited partnership as a ‘form of business organization in
which there are general partner(s) and limited liability partner(s). Key features of limited
partnerships include:
• General partners have unlimited liability
• Limited partners has limited liable, that is the limited partner is not liable for debts
beyond the amount he/she invested in the business
• Limited partners do not take part in the day to day running of the business or the
management of the business
• Limited partners can inspect the business
• Limited partners have the right to business profits (stated in partnership deed)
Both the general/ordinary and the limited partnership partners face individual income tax
processing.
Gabrielle Hinds.
Unit 2 module 1
As an entrepreneur i need to be aware of the issues associated in business ownership and
with having a business and deciding what type of venture i should take. I have to weigh
the risks and benefits of each type of venture and carefully consider stated issues before
deciding on the ownership decisions.
MODULE OUTLINE
Types of ventures
Legal and Regulatory Framework
Ethics and Social Responsibility
Guiding terms:
Non-corporate: organizations where the business and the owners are one and the same
the business is not a separate legal entity from the owner(s)
Corporation/Incorporated: the legal status of the organization and that of the owner(s)
are separate and distinct; the organization is a separate legal entity from the owners.
Unlimited Liability: the owner(s) of the business are liable or responsible for all debts and
obligations of the business. The liability can extend beyond his/her investment in the
business to personal assets.
Limited Liability: the owners(s) of the business are liable for liable for debts and
obligation of the business to the amount of their investment in the entity. His/Her
obligation is limited to the investment and liability does not go beyond this.
,Types of ventures
Sole trader
The sole trader or sole proprietor is a key form of a non-incorporated or non-corporate
business organization. This venture is owned and managed by one person. This individual
undertakes all risks for the business. Moreover, he/she makes all decisions in the
undertaking. Legally, the sole trader is responsible for all debts or obligations incurred in
the business. The sole trader/sole proprietor therefore has unlimited liability.
If the entrepreneur has to access loans facilities he or she will most times use personal
assets such as house or land as collateral to secure the loan. If the business fails or is
unable to repay the loan, the personal assets of the sole trader can be seized by the
lending institution.
Given that most sole traders are small or micro enterprises it is difficult to access funding
and the high level of risks associated with failure of these types of businesses usually
restricts growth and expansion of the business.
Legal Structure Advantages/Benefits Drawbacks/Risks
Sole Trader Low startup costs Owner bears all
(one owner) as venture is small risks and has
unlimited liability
Simple tax Does not enjoy tax
structure i.e benefits that
personal income corporations get
tax
Owner has control Difficulty in
over all decision accessing
making financing for
investment
Ease if formation of Assumes total
venture as venture responsibility for
is small and not the venture
-Examples of sole traders: complicated resulting in long
Plumbers
working hours
Electricians Owner has the sole Owner dies and
Mechanics right to shut down the business
Lawyers the venture if ceases to exist
Doctors necessary
Food vendors
Profits are enjoyed Limit to expertise
Shop owners
Independent
by the owner and skills
Carpenter available to
Landscapers venture
, Partnership (General and Limited)
A partnership is another form of a non-corporate or non-incorporated business.
Coulter(2003) describes the partnership as a form of business where two or more
business owners share the management and risk of the business. The partnership
ACT(Trinidad and Tobago): Ch 81.01(1914), states that a partnership is a relation which
subsists between persons carrying on a business in common with a view profit.
An ordinary OR general partnership can be categorized as those without a legal contract
and those with a formal partnership agreement or partnership deed (legal contract).
Partnerships that exist with the deed of partnership exist where the partners agree to a
legal contract. The main purpose of the partnership deed is to avoid grievances relating to
profits and distribution of responsibilities.
Hatten(1997), refers to this as ‘the articles of partnership’. This entitles the following information:
The obligations and responsibilities if each partner
Name of the partnership
Purpose of the partnership
Capital provided by each partner
Services/expertise provided by each partner
Decision making authority of each partner
Situations where consensual decision making is required
Duration of partnership
Distribution of profits and losses
Compensation for each partner
Dispute resolutions procedure
Procedure for adding new partner
Procedure for dissolution of the partner
Coulter (2003) describes a limited partnership as a ‘form of business organization in
which there are general partner(s) and limited liability partner(s). Key features of limited
partnerships include:
• General partners have unlimited liability
• Limited partners has limited liable, that is the limited partner is not liable for debts
beyond the amount he/she invested in the business
• Limited partners do not take part in the day to day running of the business or the
management of the business
• Limited partners can inspect the business
• Limited partners have the right to business profits (stated in partnership deed)
Both the general/ordinary and the limited partnership partners face individual income tax
processing.
