Fisheries Entrepreneurship Course - Don Mariano Marcos Memorial State University PDF

FiTe 129 FISHERIES ENTREPRENEURSHIP Marlen T. Bilog, RFT Faculty @ DMMMSU-SLUC, College of Fisheries [email protected] COURSE DESCRIPTION  This course provides the principles and practices of forming and managing small and medium scale business fisheries enterprises with att...

FiTe 129 FISHERIES ENTREPRENEURSHIP Marlen T. Bilog, RFT Faculty @ DMMMSU-SLUC, College of Fisheries [email protected] COURSE DESCRIPTION  This course provides the principles and practices of forming and managing small and medium scale business fisheries enterprises with attention to individual, cooperatives and people organization management June 15, 2021 Page 2 OBJECTIVES At the end of the course, the students should be able to: Equipped with knowledge on formation and development of small and medium scale fisheries businesses Understand the requirements of registration of approval, permission of doing business learn organization and management of entrepreneurship in individual and group organization (Cooperative/PO) learn financial accounting of small/medium scale fisheries enterprises June 15, 2021 Page 3  COURSE REQUIREMENTS A.Midterm and Final Examination…………..40% B.Performance Tasks ………………..60% B.1 Quizzes ……………. ….30% B.2 Learning Activities/ Business Plan Proposal ……………. ….20% Assignments/Projects B.3 Class Participation ………………..10 June 15, 2021 Page 4 CHAPTERS I -Introduction to Fisheries Entrepreneurship II - Entrepreneurs III -Entrepreneurship, Economic Development and Business Environment IV -Forms of Business Entrerprises V - Managing the Enterprise VI - Business Plan Vs. Feasibility Study VII - Presentation of the Business June 15, 2021 Plan Page 5  CLASSROOM POLICIES 1.Failure to attend the class after 15 minutes of the scheduled time means absent. 2.Quizzes are either announced or unannounced, so always be ready. 3.Students are obliged to wear proper uniform in all meetings. If a student does not wear his/her uniform without valid reason means absent; however, they may still attend the class. 4.Using of mobile phones, and other gadgets or devices is not allowed inside the classroom,unless permitted by the subject teacher. June 15, 2021 Page 6 5. Only those students with excused absences will be given a special activities or quizzes such as Participation in school competitions, seminars, workshops, training, SBO activities, illnesses, mourning of dead relatives. Memoranda/letters/certificates signed by authorities should be given to the instructor to be excused in the classes. 6. Incomplete requirements mean incomplete grades and it must be completed for one school year only; Otherwise, re-enrollment of the subject is advised. Note: Any acts related to plagiarism, cheating, sharing of outputs and other related violations are subjected to a failing grade in the course and other disciplinary actions in accordance with the June 15, 2021 Page 7  BASIC ETIQUETTE IN THE 1. CLASSROOM Don’t talk while your instructor/professor is talking/lecturing or when other students are called on to speak. 2. If you want to talk/share some thoughts, RAISE YOUR HAND. 3. Take notes while your instructor/professor is lecturing, DO NOT USE MOBILE GADGETS to take a picture of the lecture. 4. Arrive on class on time. 5. Avoid talking to your seatmate during class. 6. Be polite and respectful PLEASE. 7. Avoid sleeping in the class 8. AVOID using mobile gadgets during class 9. Be organized (classroom must be clean before your professor arrives) 10. NO BULLYING June 15, 2021 Page 8  CHAPTER I Introduction to Entrepreneurship & Lesson 1INTRODUCTION TO ENTREPRENEURSHIP @talentedge June 15, 2021 Page 9 Entrepreneurship? It is a process which entrepreneurs create and grow enterprises and a dynamic process undertaken by an entrepreneur to create incremental value and wealth by discovering investment opportunities, organizing an enterprise, undertaking risk and economic uncertainty and thereby contributing to economic growth June 15, 2021 Page 10 History of Entrepreneurship established in 1700s 20th century, Joseph Schumpeter an economist who focused on how the entrepreneur’s drive for innovation and improvement creates upheaval and change. “creative destruction” which means making a “new combination” entrepreneurial function “does not essentially consist in either inventing anything or otherwise creating the conditions which the enterprise exploits. It consists in getting things done.” June 15, 2021 Page 11 Other definitions of Entrepreneurship It is “the process of creating or seizing an opportunity, and pursuing it regardless of the resources currently controlled.” –Howard H. Stevenson He spells out four tenets of entrepreneurship 1. Entrepreneurship flourishes in communities where resources are mobile. 2. Entrepreneurship is greater when successful members of a community reinvest excess capital in the projects of other community members. 3. Entrepreneurship flourishes in communities in which the success of other community members is celebrated rather than derided. 4. Entrepreneurship is greater in communities that see change as positive rather than negative. June 15, 2021 Page 12 Some Modern Definitions 1. “Entrepreneurship is an activity that involves the discovery, evaluation, and exploitation of opportunities to introduce new goods and services, ways of organizing, markets, processes, and new materials through organizing efforts that previously had not existed.”- Scott Shane (Case Western) 2. “The founding of new businesses is the essence of entrepreneurial activity.”- W. Gibb Dyer, Jr. June 15, 2021 Page 13 Some Modern Definitions 3. An entrepreneur has a two-fold function a.Exercising responsible control (directing the work of others) b.Securing the owners of productive services against uncertainty and fluctuations in their incomes He distinguished between risk, which is insurable, and uncertainty, which is not -Uncertainty includes things like changes affecting the marketing of consumer products (e.g., fashion trends) and profit compensates entrepreneurs for bearing uncertainty - Frank Knight June 15, 2021 Page 14 Entrepreneurial Community The community where significant economic and social entrepreneurial activity exists within an effective system of public and private support Entrepreneurship Development Policies and practices (public and private) that foster entrepreneurship June 15, 2021 Page 15 Importance of Entrepreneurship 1. Taking to a higher rate of economic growth by creation of value 2. Speed up the process of industrial use of the factors of production 3. Creation of employment opportunity 4. Dispersal of economic activities to different sectors of the economy and identifying new venues of growth 5. Better social changes June 15, 2021 Page 16 Importance of Entrepreneurship 5. Improvement of the standard of living of different weaker sections of the society 6. Develop technical know-how 7. Improve the culture of business and expand commercial activities 8. Entrepreneurship acts as a change agent to meet the requirement of the change markets and customer preferences June 15, 2021 Page 17  & Lesson 2Elements and Process of Entrepreneurship Business  Is an organized effort of individuals to produce and sell goods and services to satisfy the needs of society in which the entrepreneur must combine four types of productive resources: human, financial, material, and information Small business  A business that is independently owned and operated, not dominated in its field of operation, and meets certain standards of several employees and capital. June 15, 2021 Page 18  Microbusiness  It is a very small business where the owner is the principal worker and he employs one or more assistants and the owner directs the work of employees Small Business Owners  Small business owners are people who own a major equity stake in a company with fewer than 500 employees. June 15, 2021 Page 19  Advantages of a Small Business o Greater Opportunity to get rich through stock options o Feel more important o Feel more secure o Comfort Level June 15, 2021 Page 20  Disadvantages of a Small Business o Lower guaranteed pay o Fewer benefits o Expected to have many skills o Too much cohesion o Hard to move to a big company o Large fluctuations in income possible June 15, 2021 Page 21  Magna Carta for Small Enterprises (RA 6977) o Micro : less than P 50,000 o Cottage : P 50,001 to P 500,000 o Small : P 500,001 to P 5,000,000 o Medium : P 5,000,001 to P 20,000,000 June 15, 2021 Page 22 Features of Small business o Low capital but high labor intensity o Efficient in specialized skill or service o Succeeds in small, isolated, or overlooked markets o Operates in small markets o Closer to the marketplace o The owner of small businesses are also the manager o Capital comes from the owner of a small group o The area of operation is small o The size of the enterprise is small in the June 15, 2021 Page 23 How to Avoid Failure in Business o Know your business in depth o Have a good relationship with stakeholders o Prepare a business plan o Managing financial resources o Understanding financial statement o Learn to manage people effectively o Keep in tune with yourself o Take up short managerial courses in management o Be sensitive to your customers June 15, 2021 Page 24 The Process of Entrepreneurship 1. Identifying and evaluating business opportunities  New business opportunities may be the result of technological change, market shift, government regulation, or computation  The most critical element of the entrepreneurial process as it allows the entrepreneur to assess whether the specific product or service has the return needed for the resource required June 15, 2021 Page 25 The Process of Entrepreneurship 2. Developing business plan  The business plan is a document that the entrepreneur prepares before going to the implementation stage Description of the business and the marketing, financial, organizational, and operational plans necessary for the foundation of the venture  Planning is one of the major activities to be done.  A business plan is defined as a step-by-step outline of how an entrepreneur or the owner of an enterprise expects to turn ideas into reality. June 15, 2021 Page 26  Questions To Keep In Mind in Developing a business plan A.What are my motivations for owning a business?  Motivations mean deciding what your motivations are will direct you toward what type of business fits you best. Types of Business According to Motivation 1.Lifestyle Venture o A small company that provides its owner independence, autonomy, and control which often runs out of household. o Provides flexibility (hours, meeting places, attire) o Aligns personal interests and hobbies with your desire to make a profit. June 15, 2021 Page 27 2. Smaller Profit Venture o A small company not concentrated on pushing the envelope and growing inordinately large. o Making millions of dollars is not important. o Content with making a decent living. Ex. Mom and Pop Stores 3. High Growth Venture o The goal is maximum profit and growth. o Concentrated on pushing the envelope and growing as large as possible. o Focus on innovation June 15, 2021 Page 28  Questions To Keep In Mind in Developing a business plan B. Should I start or buy a business? o Start or Buy?  Start- cheapest, but very difficult and requires most planning/research  Buy – expensive – may be out or reach and requires less planning and research  Franchise (middle ground) – a business run by an individual (the franchisee) to whom a franchiser grants the right to market a certain good or service. June 15, 2021 Page 29  Questions To Keep In Mind in Developing a business plan C. What and where is the market for what I want to sell? o The Market???  Needs planning & research essential, extensive market surveys (family, friends, neighbors) and magazines and Polls offer some information on the market, Businessweek, Harris Poll D. How much will all this cost me? E. Should my company be domestic or global? June 15, 2021 Page 30  The Process of Entrepreneurship 3. Determining the resources required for business  It is a process that starts with an appraisal of the entrepreneur’s present resources  As the business develops, more funds will probably be needed to finance the growth of the venture, requiring more ownership to relinquish June 15, 2021 Page 31 The Process of Entrepreneurship 4. Managing the Enterprise  After the resources are acquired the entrepreneur must employ them through the implementation of a business plan  Involves implementing a management style and structure, as well as determining the key variable for success June 15, 2021 Page 32 “Entrepreneurship will become a core skill which all our young people will need to exploit the opportunities emerging from science and technology, culture and communications.- ”Tony Blair (1953 - ) British prime minister. “A business that makes nothing but money is a poor kind of business.” Attributed to Henry Ford (1863 - 1947) U.S. car manufacturer ”One of the many reasons why many are not reaching the top is that they never wanted to start at the bottom”- June 15, 2021 Page 33  Quiz #1 Given that you are capable of doing a business! What will be your business to venture??? (100 points) 1. What are your motivations for owning a business? What type of business according to your motivation that you will venture? 2. Should you start or Buy? Why? 3. What and where is your market of your business? Why? 4. How much do you think that business will cost you? 5. Is if for domestic or global? Why??? June 15, 2021 Page 34  CHAPTER II Entrepreneurs & Lesson 1Definition, Evolution and Characteristics of Entrepreneurs June 15, 2021 Page 35 Entrepreneur  An entrepreneur is a person who organizes and manages any enterprise, especially a business, usually with considerable initiative and risk. He is also a person whose goal is to create or capitalize on new economic opportunities through innovation. June 15, 2021 Page 36  Entrepreneur  As someone who exercises initiative by organizing a venture to take benefit of an opportunity and, as the decision maker decides what, how, and how much of a good or service will be produced. He is a business leader and innovator of new ideas and business processes. Entrepreneur is not necessarily motivated by profit but possesses a deep passion that drives them to overcome all the difficulties and challenges when running the business-businessdictionary.com June 15, 2021 Page 37  Entrepreneur vs. Intrapreneurs  Entrepreneurs are people that notice opportunities and take the initiative to mobilize resources to make new goods and services while Intrapreneurs also notice opportunities and take the initiative to mobilize resources, however, they work in large companies and contribute to the innovation of the firm. And they often become entrepreneurs. June 15, 2021 Page 38 June 15, 2021 Page 39 1.Vision  identifying emerging opportunities and commonly asking the following questions: What might be possible in your region related to entrepreneurship? What can build on past or current accomplishments within the region? 2. Innovation  creating new businesses or new ways of doing something June 15, 2021 Page 40 3. Risk bearing  taking risks and facing uncertainty 4. Organizing  collection and coordination of the necessary resources June 15, 2021 Page 41  Many different types of people are attracted to become entrepreneurs and a wide variety of talents, aptitudes, and personal traits help to contribute to an entrepreneurial spirit, personality, and vision. There is no definitive profile. June 15, 2021 Page 42 Basic Characteristics of an Entrepreneur June 15, 2021 Page 43 Basic Characteristics of an Entrepreneur o Self-confident and optimist (feel competent) o Taking risks (Risk takers) o Respond positively to changes o Flexible and adapt o Knowledgeable of markets o Able to get along well with others o Independent-minded o Knowledge o Energetic and diligent o Creative June 15, 2021 Page 44 Basic Characteristics of an Entrepreneur o Dynamic leader o Responsive to suggestions o Take initiatives o Resourceful and persevering o Perceptive with foresight o Responsive to criticism o Original thinkers o Take responsibility for own actions o Set high goals June 15, 2021 Page 45  These are other characteristics of an entrepreneur from A-Z as identified by Dr. Neil Flanagan and Professor Peter Baskerville. A is for Ambiguity B is for Beachhead strategies C is for Commitment D is for Destiny E is for Effectual reasoning F is for Focus G is for Global H is for Health I is for Innovation J is for Just do it. June 15, 2021 Page 46 These are other characteristics of an entrepreneur from A-Z as identified by Dr. Neil Flanagan and Professor Peter Baskerville. K is for Keep it real. L is for Leadership. M is for Meaning N is for Never Give up O is for Opportunistic P is for People Q is for Quirky R is for Risk June 15, 2021 Page 47 These are other characteristics of an entrepreneur from A-Z as identified by Dr. Neil Flanagan and Professor Peter Baskerville. S is for Subjective Advantages T is for Timing U is for Under the Radar V is for value-added W is for Work and play X is for X factor Y is for You Z is for Zest June 15, 2021 Page 48 Other Entrepreneurs suggest that three divisions of the characteristics of Entrepreneurs result in successful entrepreneurs June 15, 2021 Page 49  1. Key Personal Attributes a. Entrepreneurs are Made, Not Born!  It developed early in life, with the family environment playing an important role  Entrepreneurs tend to have self-employed parents who tend to support and encourage independence, achievement, and responsibility  Firstborns tend to have more entrepreneurial attributes because they receive more attention, and have to forge their way, thus creating higher self- confidence June 15, 2021 Page 50  1. Key Personal Attributes b. Entrepreneurial Careers  Explains why many entrepreneurs start multiple companies throughout their career  Corridor Principle means using one business to start or acquire others and then repeating the process  Serial Entrepreneurs- A person who founds and operates multiple companies during one career June 15, 2021 Page 51  2. Strong Managerial Competencies a. Need for Achievement  A person’s desire either for excellence or to succeed in competitive situations  High achievers take responsibility for attaining their goals, set moderately difficult goals, and want immediate feedback on their performance  Success is measured in terms of what those efforts have accomplished June 15, 2021 Page 52  2. Strong Managerial Competencies b. Desire for Independence  Entrepreneurs often seek independence from others, as a result, they generally aren’t motivated to perform well in large, bureaucratic organizations  Entrepreneurs have an internal drive, are confident in their abilities, and possess a great deal of self-respect June 15, 2021 Page 53  2. Strong Managerial Competencies c. Self-confidence  Because of the high risks involved in running an entrepreneurial organization, having an “upbeat” and self-confident attitude is essential  A successful track record leads to improved self-confidence and self-esteem which enables that person to be optimistic in representing the firm to employees and customers alike June 15, 2021 Page 54  2. Strong Managerial Competencies d. Self-sacrifice  Essential that nothing worth having is free  Success has a high price, and entrepreneurs have to be willing to sacrifice certain things June 15, 2021 Page 55  3. Good Technical Skills/ Technical Proficiency Many entrepreneurs demonstrate strong technical skills, typically bringing some related experience to their business ventures For example, successful car dealers usually have lots of technical knowledge about selling and servicing automobiles before opening their dealerships Especially important in the computer industry NOT ALWAYS NECESSARY June 15, 2021 Page 56 Personal Characteristics of successful entrepreneurs Persistent Creative Responsible Inquisitive Goal-oriented Independent Self-confident Risk taker June 15, 2021 Page 57 Skills needed by successful entrepreneurs o Communication skills o Human relations skills o Math skills o Problem-solving and Decision-making skills o Technical skills o Basic business skills June 15, 2021 Page 58 Successful vs. Unsuccessful entrepreneurs June 15, 2021 Page 59 June 15, 2021 Page 60  Why do people want to become an entrepreneur? Opportunity - a chance to be part of a new environment or to be exposed to a new environment; a chance to share the dreams of many people Profit-fast Road to the richness Independence - not working for others Challenge - to take the risk June 15, 2021 Page 61 June 15, 2021 Page 62 Lesson 2 Types and Functions of Entrepreneurs June 15, 2021 Page 63 1. Innovative entrepreneurs introduces new goods, inaugurate new method of production, discovers new market, and recognizes the enterprise June 15, 2021 Page 64 2. Imitative entrepreneurs imitate techniques and technology innovated by others June 15, 2021 Page 65 3. Fabian entrepreneurs characterized by very great caution and skepticism in experimenting with any change in their enterprise June 15, 2021 Page 66 4. Drone entrepreneurs characterized by refusal to adopt the opportunity to make changes in production formula even at the cost of severely reduced returns relative to other producers June 15, 2021 Page 67 5. Entrepreneur as a risk bearer an entrepreneur is an agent who buys factors of production at certain prices to combine them into a product with a view of selling it at uncertain prices in future 6. Entrepreneur as an organizer an entrepreneur combines the land of one; the labor of another and the capital of yet another, and thus produces a product June 15, 2021 Page 68 7. Entrepreneur as a leader leadership, management ability, and team- building as essential qualities of an entrepreneur Classifications of Entrepreneur A. Type of Business B. Motivation C. Use of Technology D. Stage Development June 15, 2021 Page 69  A. Classification according to TYPE OF BUSINESS 1. Business entrepreneur - individuals who conceive an idea for a new product or service and then create a business to materialize their ideas into reality 2. Trading Entrepreneur - one who undertakes trading activities and is not concerned with the manufacturing work he or she does 3. Corporate Entrepreneur - an individual who plan and develop and manages a corporate 4. Agricultural entrepreneurs - agricultural activity i.e. raising and marketing of crop and agricultural input June 15, 2021 Page 70  B. Classification according to MOTIVATION 1. Pure entrepreneur - motivated psychological and economic reward 2. Induced entrepreneur - induced to take up entrepreneurial task due to the policy measures of the government that provides assistance, incentive, and necessary overhead facilities to start a venture 3. Motivated entrepreneur - motivation is the desire for self- fulfillment June 15, 2021 Page 71 C. Classification according to USE OF TECHNOLOGY 1. Technical entrepreneur - concentrate on manufacturing rather than marketing 2. Non-technical entrepreneur - concentrate on developing alternative marketing, distribution, and promotion aspects of their product rather than the manufacturing aspect 3. Professional entrepreneur - interested in neither the technical aspect nor the non-technical aspects of the product June 15, 2021 Page 72  D. Classification according to STAGE DEVELOPMENT 1. First generation entrepreneur -starts an industrial unit by innovative skill i.e. combines different technology to produce a marketable product 2. Modern entrepreneurs - undertake those ventures which go well along with changing demand in the market 3. Classical entrepreneur - tries to increase their profit by developing self-supporting ventures June 15, 2021 Page 73  Responsibility of Entrepreneurs A. To the Nation o Tax timely o Follow rules and regulations o Adding wealth to the Nation B. To the Enterprise o Survival and growth o Profit o Company image o Fair compensation June 15, 2021 Page 74 C. To the Society o Using resources properly o Employment o Minimizing toxic levels D. To their Business Associates o Profit or dividend fairly o Future certainty o Fair knowledge of company performance June 15, 2021 Page 75 Contributions of Entrepreneurs A. Develop new markets Entrepreneurs are resourceful and creative which they can create customers or buyers B. Discover new sources of materials Entrepreneurs persist in discovering new sources of materials to improve their enterprise and those who can develop new sources of materials enjoy a comparative advantage in terms of supply, cost, and quality June 15, 2021 Page 76  Contributions of Entrepreneurs C. Mobilize capital resources Entrepreneurs have initiative and self-confidence in accumulating and mobilizing capital resources for new business or business expansion D. Introduce new technologies, new industries, and new products Entrepreneurs take advantage of business opportunities and transform these into profits and introduce something new or something different E. Create employment The biggest employer is the private business sector and more jobs mean more income June 15, 2021 Page 77  “Everything is always impossible before it works. That is what entrepreneurs are all about—doing what people have told them is impossible.” Hunt Greene U.S. venture capitalist. June 15, 2021 Page 78 CHAPTER III ENTREPRENEURSHIP, ECONOMIC DEVELOPMENT AND BUSINESS ENVIRONMENT June 15, 2021 Page 79 1. Land- Land includes any natural resource used to produce goods and services; anything that comes from the land. June 15, 2021 Page 80 2. Labor- Labor refers to the effort and skills of people who work to produce goods and services. 3. Capital- refers to the tools, machinery, and other physical assets used to produce goods and services. 4. Entrepreneurship- combine the other factors of production, land, labor, and capital to make a profit. June 15, 2021 Page 81  Natural human resources resources Foreign FACTORS OF ECONOMIC & industrializati on DEVELOPMENT Private Investmen t Poverty & Cultural unemployment Globalizatio Factors n June 15, 2021 Page 82 Roles of Entrepreneurs in Economic Development Better Production method Development of complementary goods Conversion of Natural Resources New Products and ServicesNew Products and Services Revenue to government Abolition of Monopoly Revenue to government June 15, 2021 Page 83 Reasons for the fast development of globalization: 1. Globalization has emerged because of the advances in information, communication, and transportation (ICT) technologies. 2. There are new techniques of production and new forms of organization that have given flexibility to the location of industrial activities and reduced the share of wages in production June 15, 2021 Page 84  Entrepreneurship helps provide the following: 1. Products and necessities that sustain life; 2. freedom from servitude, ignorance, social deprivation, and misery, and 3. self-esteem for the entrepreneur: to be a person with a sense of self-worth and self-respect and being of service to the community. 4. Enterprises and communities need each other to survive. Enterprises in the community often help each other too. 5. National well-being brings about development because people are assured of having the necessary goods on time, within reach, as needed, even as money circulates and entrepreneurs make a profit. June 15, 2021 Page 85 Indicators proving that a country has reached national well—being and true development Owners live within the community where their enterprise is located. Enterprises serve the needs of the residents for products and services and make a living from doing this. The community has an adequate supply of raw materials that the enterprise would need. The community offers the enterprise a steady source of labor and in turn, is provided gainful employment by the business. June 15, 2021 Page 86 Indicators proving that a country has reached national well—being and true development The community willingly patronizes the enterprise and its products and services. Local government executives are supportive of business enterprises. Local government executives are considerate and friendly to business owners. Local government executives assure the businesses of peace and order at all times. Water and power supply are abundant. June 15, 2021 Page 87 Assignment: Describe the factors that affect entrepreneurship in the Philippines. June 15, 2021 Page 88  Barriers to Entrepreneurship Development Entrepreneurs, especially in the rural areas, face the following non-financial barriers: o Difficulty in finding information on local regulations, taxation, and environmental laws o Inadequate infrastructure facilities o Lack of support from local and national government o Issues of graft and corruption o Resistance to technological advancement o Inadequate digital connections and Internet facilities June 15, 2021 Page 89 Reasons Why Ethical Entrepreneurs are Important for the Right and Sustainable Development of a Country o A country does not only want to grow and develop; but to grow and develop in the right way, which is the sustainable way. o An entrepreneur must run his business based on high ethical standards. o Doing business the ethical way builds consumer loyalty, keeps good employees and makes them happy and productive, and creates a stable environment that minimizes unexpected problems. o A country whose base of job-generating, income-producing entrepreneurs stick to high standards of conduct is likely to sustain its socio-economic growth because it is one that maximizes prosperity, harmony, productivity, and natural resources. June 15, 2021 Page 90 FORMS OF BUSINESS October 1, 2024 Page 92  Sole Proprietorship  owned by an individual who generally has full control and authority over the business. exclusively owns all assets and profits of the business most basic type of business He or she is also personally liable for all the debts and losses that the business might incur. October 1, 2024 Page 93  Why Choose a Sole Proprietorship? A great option for any Filipino who dreams about starting his or her own business You will not be required to work for anyone  Easier to set-up and register  It requires little amount of capital to start Has lower cost in regards to government permits and licenses Have less regulations October 1, 2024 Page 94 Source of fund  Savings Personal loan October 1, 2024 Page 95  Advantages of Sole Proprietorship 1. Ease and low cost of formation and distribution 2. Direct motivation and personal care 3. Freedom and promptness in action 4. Business Secrecy October 1, 2024 Page 96  Advantages of Sole Proprietorship 5. Social Desirability 6. Absolute control 7. Flexibility in operations 8. Minimum government control 9. Personal touch October 1, 2024 Page 97  Additional Advantages of Sole Proprietorship o Least costly form o Profit incentive o Total decision-making o No special legal restrictions o Easy to discontinue October 1, 2024 Page 98  Disadvantages of Sole Proprietorship 1. Limited Resource and size 2. Limited liability 3. Limited managerial skills 4. Uncertain future October 1, 2024 Page 99 How to Register a Sole Proprietor Business Register your business name at Department of Trade and Industry (DTI) Register with Barangay Register with Mayor’s Office (LGU) Register with the Bureau of Internal Revenue (BIR) October 1, 2024 Page 100 6 Tips for Sole Proprietor Success Create a Solid Business Plan/Strategy Create a Killer Website Build Customer Loyalty Have a Strong Social Media Presence Don’t Forget Advertising Find a Good Lawyer October 1, 2024 Page 101 6 Things to Avoid as a Sole Proprietor Skipping the Planning Phase Paying Bills Late not Knowing Who Your Customer Is Fear of Financing Wearing Too Many Hats Expecting to Get Rich Overnight “Success is a process, and can only be achieved by hard work” October 1, 2024 Page 102  Partnership  An association of two or more people who co-own a business for the purpose of making a profit. Partnerships are like sole proprietorships except that there are two or more owners who have agreed to divide, in some proportion, the risks taken and the profits earned by the firm. by the contract of partnership, two or more persons bind themselves to contribute money, property or industry to a common fund with the intention of dividing the profits among themselves. October 1, 2024 Page 103  Types of Partners 1. General partner - are the main investor – active in the operation of a business – Is liable for all of business’ debts. - In small businesses with only two or three owners, all typically will be general partners. 2.Limited partner – invests in a business but is not involved in its daily operation - they have only limited liability, as if they were shareholders in a corporation. October 1, 2024 Page 104 3. Master limited partnership a partnership whose shares are traded on stock exchanges, just like corporations October 1, 2024 Page 105 Advantages of Partnership Partners can pool financial resources to fund expansion Can divide their duties and responsibilities according to personal expertise and abilities Relationship with stakeholders Working style October 1, 2024 Page 106  Additional Advantages of Partnership o Easy to establish o Complementary skills o Division of profits o Larger pool of capital o Little governmental regulation o Flexibility o Taxation o Ability to attract limited partner October 1, 2024 Page 107 Disadvantages there are quarrels may entail substantial financial risks partners still face unlimited liability and may have their personal property and savings claimed to pay off the business’s debts Potential for personality and authority conflicts “When two men in business always agree, one of them is unnecessary” -William Wrigley, Jr. (1861 - 1932)U.S. business executive October 1, 2024 Page 108 Additional Disadvantages o Difficulty in disposing of interest o Lack of continuity o Potential for personality and authority conflicts ❑ Partners bound by law of agency October 1, 2024 Page 109  Corporat ion A legal entity that exist independently of its owners. Owners are called shareholders October 1, 2024 Page 110 Attributes of a Corporation  artificial beings created by operation of law that allows people to associate together for a common purpose under a common name, having the right of succession and the powers, attributes and properties expressly authorized by law or incident to its existence. juridical persons with personality separate and distinct from that of its stockholders charter gives the corporation certain privileges, including the right to buy and sell property, enter into contracts, sue and be sued, and borrow and lend money October 1, 2024 Page 111 Attributes of a Corporation a legal entity that exists as distinct from the individuals who control and invest in it consists of at least five (5) to fifteen (15) incorporators each of who must hold at least one share and must be registered with the SEC. October 1, 2024 Page 112 Terms to know in corporation 1. Incorporators 2. Corporator 3. Stockholders 4. Members 5. Promoters 6. Subscriber 7. underwriter June 15, 2021 Page 113  Stockholder vs Shareholder Stockholder shareholder Have an interest in the business Partly own the business through bud don’t necessarily own it shares of the stock Ex. Creditors, debenture holders, Ex. Equity shareholders, preference employees, customers, suppliers, shareholders government vote for directors, be issued vote for directors, be issued dividends, and be issued their share dividends, and be issued their share of any residual assets upon of any residual assets upon liquidation of a company. liquidation of a company. October 1, 2024 Page 114 Stock Exchange organized market for buying and selling financial instruments known as securities, which include stocks, bonds, options, and futures not all stocks are bought and sold at a specific site. Such stocks are referred to as unlisted. Many of these stocks are traded over the counter—that is, by telephone or by computer October 1, 2024 Page 115 Kinds of Corporation Such company, if 60% Filipino and 40% foreign-owned, is considered a Filipino corporation. If more than 40% foreign-owned, it is considered a domestic foreign-owned corporation. Stock Corporation Non-stock Corporation October 1, 2024 Page 116 STOCK VS NON-STOCK stock Non-stock For profit For religious, charitable, education, scientific etc. Profit distributed to shareholder Profit is used for further purpose stockholders Members Right to vote according to no. of shares Each member= 1 vote Voting right w/ or w/o proxy is denied Voting w/ or w/o proxy cannot be denied Voting by mail is possible Not possible Board of directors Members of the corporation 1 year term 3 years term Officers appointed by board Officers elected by members Right transferable Rights not transferable October 1, 2024 Page 117 Advantages Separate juridical personality Limited liability to investors Free transferability of units of ownership\ Can continue indefinitely through complete changes of ownership, leadership, and staffing Centralized Management October 1, 2024 Page 118 Disadvantages Cost and time in incorporating Double taxation Potential for diminished incentives Legal requirements and red tape Potential loss of control High capital requirement October 1, 2024 Page 119 Fees involved in creating and organizing a corporation can be expensive Have higher tax burdens than other kinds of businesses. Takes time to organize Complexity of organization Shareholders control is limited Corporations are also subject to more government regulation than sole proprietorships or partnerships. October 1, 2024 Page 120 Certificate of Incorporation ❑ Name ❑ Statement of purpose ❑ Time horizon ❑ Names and addresses of incorporators ❑ Place of business ❑ Capital stock authorization’ ❑ Capital required at time of incorporation ❑ Provisions for preemptive rights ❑ Restrictions on transferring shares ❑ Names and addresses of officers ❑ By-laws October 1, 2024 Page 121 General procedures in registration with SEC Verify/reserve proposed name Draw up the Articles of Incorporation and By-Laws in accordance with Corporation Code If applicable, get endorsements from other government agencies Deposit paid-up capital/contribution (for foundations only) in the bank Pay the filing fees Claim the Certificate of Incorporation/License 7. Buy and register Stocks and Transfer Book or Membership Book October 1, 2024 Page 122 “A friendship founded on business is better than a business founded on friendship” John D. Rockefeller (1839 - 1937) U.S. industrialist and philanthropist “Remember that time is money” Benjamin Franklin (1706 - 1790) U.S. states man and scientist. “Total commitment to family and total commitment to career is possible, but fatiguing” - Muriel Fox (1928 - ) U.S. business executive October 1, 2024 Page 123 Cooperative Business owned and operated by a group of people with a strong common interest Start-up costs are shared among the members of the cooperative Members own and control the business and make all business decisions October 1, 2024 Page 124 Advantages of Cooperative Members own and control the business Members share the start-up costs and the running of the business They share the final risk Members may pay less for goods and services and get more for those they sell October 1, 2024 Page 125 Disadvantages of cooperative Because each member only has one vote, members may not want to invest money for expansion Because of the number of members, making decisions can be difficult Members can have conflicts October 1, 2024 Page 126 Objectives and Goals of a Cooperative Primary objective –to help improve the quality of life of its members Provide goods and services to its members to enable to attain increased income, savings, investments, productivity, and purchasing power, and promote among themselves. Provide optimum social and economic benefits to its members Teach them efficient ways of doing things in cooperative manner October 1, 2024 Page 127 Objectives and Goals of a Cooperative Propagate cooperative practices and new ideas in business and management Allow the lower the income and less privileged groups to increase their ownership in the wealth of the nation; Cooperate with the government, other cooperatives and people- oriented organizations to further the attainment of any of the foregoing objectives October 1, 2024 Page 128 Types of Cooperatives Credit cooperative Consumer’s cooperative Producers’ cooperative  Marketing cooperative Service cooperative Multi-purpose Cooperative Advocacy Cooperative Agrarian Reform Cooperative October 1, 2024 Page 129 Types of Cooperatives  Cooperative Bank  Dairy Cooperative  Education Cooperative  Electric Cooperative  Financial Service Cooperative  Fishermen Cooperative  Health Services Cooperative  Housing Cooperative  Insurance Cooperative  Transport Cooperative  Water Service Cooperative  Workers Cooperative October 1, 2024 Page 130 Categories of Cooperatives 1. In terms of membership: Primary – the members of which are natural persons Secondary – the members of which are primaries Tertiary – the members of which are secondary cooperatives 2. In terms of territory: Cooperatives are categorized according to areas of operation which may or may not coincide with the political subdivisions of the country October 1, 2024 Page 131 Privileges of the Cooperatives October 1, 2024 Page 132 October 1, 2024 Page 133 October 1, 2024 Page 134 October 1, 2024 Page 135 October 1, 2024 Page 136 Powers and Capacities of Cooperative To be exclusive use of its registered name, to sue and be sued Of Succession To Amends all articles of corporation in accordance with the provision of rA9520; To adapt by laws not contrary to law, moral or public policy and to amend and repeal the same in accordance with RA 9520; To purchase, receive, take or grant, hold, convey, sell, lease, pledge and otherwise deal with such real and personal property as the transaction of the lawful affairs of the cooperative may reasonably , subject to the limitation prescribed by law and the constitutions; October 1, 2024 Page 137  To Enter into division, merger or consolidation To form subsidiary cooperatives and join federations or unions as provided in RA 9520; To Avail loans To avail of preferential rights granted to cooperatives under RA 7160 Known as Local Government Code. To organize and operate school in accordance with RA no. 9155 or basic Education Act of 2021. To Exercise such other power granted by RA9520necessary to carry out its purpose as stated in its articles of cooperation. October 1, 2024 Page 138 Benefits derived from the Cooperatives o Economic benefits Members get a share of the cooperative’s net surplus by patronizing its services. A certain percentage of the cooperative’s net surplus is returned to the members after a period of one year usually during the annual general assembly. It is called patronage refund Patronage refund shall be distributed to the members in proportion to their patronage to the services of the cooperative. Through patronage refund, members are actually saving while using the services of the cooperative. Those who do not patronize the services of the cooperative are not entitled to patronage refund. They are only entitled to interest on their capital invested in the cooperative. October 1, 2024 Page 139 o Cooperative members develop the habit of thrift and savings; o Cooperatives serves as the training ground for its members in simple business operation, democratic leadership and responsible citizenship o It offers opportunities to its member’s potential capabilities in productive purposes which may redound to their material benefits and progress. o A cooperative teaches its members self-discipline, self-reliance and other desirable attitudes which make every member a better individual and a better member of society. October 1, 2024 Page 140