CHAPTER 1

1- Advantages and disadvantages to having a home office :

Advantages:
a- Able to save many an office space and commute expenses.
b- Enjoy the flexibility of not having to "punch a clock".
Disadvantages:
a- Require a great deal of self-discipline.
b- Must be sure not to work around the clock.
2- The common characteristics of all successful entrepreneurs:
a- Self-directed
You should be comfortable with your business and selfdisciplined.
b- Self-nurturing
You must believe in your idea.
c- Action oriented
Burning desire to realize, actualize and build your dream into
reality.
d- Highly energetic.
e- Tolerant of uncertainty
Successful entrepreneurs take only calculated risks. Still, they
must be able to take some big risks sometimes.
3- Flashlight approach
Every time entrepreneurs traveled on business, they were
expected to back with at least one idea worth more than the cost
of their trip.
4- The reasons of that many people decide to take the risk of
becoming an entrepreneur:
a- Opportunity.
b- Profit.
c- Independence.
d- Challenge.
Ayman.shokry@telecomegypt.com

5- Types of business ownership

The three main legal forms for a business:
1- Sole proprietorships

A form of ownership that involves one individual

called sole proprietor.
The advantages:
a- Easy to start up business and easy to get out of it.
b- You get to be your own boss.
c- Retaining of the profit.
d- There are no special federal taxes (taxes of personal income
only).
The disadvantages:
a- Unlimited liability

The responsibility of business owners for all of the

debts of the business.
b- Work for many hours.
c- Lack of the fringe benefits due to sick leave, health
insurance and unpaid vacation time.
d- Limited lifespan.
2- Partnership

Legal form of business with two or more owners.

Types of partnership:
a- General partnership

A partnership in which all owners share in

operating the business and in assuming liability for
the business's debts.
b- Limited partnership
A partnership with one or more general partners
one or more limited partners.

Ayman.shokry@telecomegypt.com

Definitions:

General partner
An owner (partner) who has unlimited liability and
is active in managing the firm.
Limited partner
An owner who invests money in the business, but
doesn't have any management responsibility or
liability for losses, beyond the investment.
Limited liability
Means that limited partners are not responsible for
the debts of the business, beyond the amount of
their investment-their liability is limited to the
amount they put into the company; their personal
asset are not at risk.
c- Master limited partnership (MLP)

Structured much like a corporation in that acts like

a corporation and is traded on the stock exchanges
like a corporation, but taxed like a partnership and
thus avoids the corporate income tax.
d- Limited liability partnership (LLP)

LLPs limit partners' risk of losing their personal

assets to only their own acts and omissions, and to
the acts and omission of people under their
supervision.

Ayman.shokry@telecomegypt.com

The advantages:
a- There are more financial resources.
b- Pooled knowledge.

The disadvantages:
abcd-

The division of profits.

General partner is liable for the debts of the firm.
Conflict among the partners.
It's difficult to get out.

3- Corporations
Definitions:

Corporate governance
The processes, customs, policies, laws, and institutions
affecting the way in which a corporation is directed,
administered, or controlled.
Board of directors
The group ultimately responsible for the decisions of a
business.
Types of corporation:
a- C corporation
A conventional ( c ) corporation is a form of business

ownership that provides limited liability.

OR
A state-chartered legal entity with the authority to act and
have liability separate from its owners.

HINT: stockholder are its owners.

Ayman.shokry@telecomegypt.com

b- S-corporation

A type of legal entity in which the biggest

advantage is that it is taxed like a sole
proprietorship.
It's created by the government.
Restrictions:
1- No more than 100 shareholders.
2- Shareholders are individuals, estates, citizens, or
permanent residents.
3- One class of stock.
4- 25% only passive income ( rent or interest ).
c- Limited liability companies (LLCs)
Is similar to the S-corporation, but without the special
restrictions.
Advantages of LLCs:
1- Limited liability.
2- Choose the form of taxation they want.
3- The ownership rules are flexible.
4- More operating flexibility.
Disadvantages of LLCs:
1- Cannot sell stock.
2- There is more paperwork required to start an LLC.

The advantage of corporation:

1- The ability to get more money for investment.
2- Allowed to sell stock
Boost the growth of the company.
Easy to change ownership.
Easier to draw talented employees.
Limited liability.

Ayman.shokry@telecomegypt.com

The disadvantages of corporation:

1- A lot of paperwork.
2- Has two tax returns (unless it's an S-corporation).

Double taxation
Occurs when the owners of the corporation are
taxed twice-once when the corporation itself
gets taxed and a second time when the
dividends are taxed.
3- Conflict often occurs between stockholders and board
members.

6- Alternatives to start your business (not from scratch)

1- Franchise
Chain store
A business that has central management (all stores are run
by the same people) and shares a brand.
Franchise
A business that hasn't central management (the owner of
each franchise store is responsible for his or her own
business).
Company stores

A store owned by a chain that owns and franchises

stores.
Hint
A franchise is not a legal form of business but rather a type
of business.
The advantages:
a- Marketing and management assistance.
b- Franchiser provide intensive training.
c- Off financial assistance.
d- Still enjoy the benefits of being a sole proprietor.
e- A lower failure rate.

Ayman.shokry@telecomegypt.com

The disadvantages:
a- Large start up costs.
b- Franchises must share the profit.
c- Management of franchisor
Have very tight restrictions on things.
Bad publicity experiences.
d- Other cattail effects
Cannibalization
Bad services

2- Buying an existing business.

3- Cooperative

A business owned and controlled by the people who use

it-producers, consumers, or workers with similar needs
who pool their resources for mutual gain.

7- Corporate expansion
1- Merger

The result of two firms forming one company.

Types of corporate mergers:
a- Vertical merger

The joining of two firms involved in different stages of

related business.
b- Horizontal merger
Joins two firms in the same industry and allows them
to diversify or expand their products.
c- Conglomerate merger
Unites firms in completely unrelated industries.

Ayman.shokry@telecomegypt.com

Hostile takeover
Attempts by the bidder to acquire a firm against the
interest of the latter's management.
2- Acquisition

One company's purchase of the property and obligations

of another company.
Types of buyouts
a- Leveraged buyout (LBO)

An attempt by employees, management, or a group of

investors to purchase an organization primarily
through borrowing.
b- Management buyout
When employees of the company get together to
purchase the business.
Hint:
The majority of the time, a management buyout will also be a
LBO .
8- The five main areas of focus when starting a small business
1- Planning the business

Business planning
Detailed written statement that describes the nature of
the business, the target market, the advantages the
business will have in relation to competition, and the
resources and qualifications of the owner[s].
Intrapreneuring
The process of continuing to innovate a small business.
OR
An entrepreneur is constantly finding ways to improve and expand
his or her business.

Ayman.shokry@telecomegypt.com

2- Financing
Several potential sources of capital
a- Venture capitalists

A company that has money to invest in small and

large businesses and in return for its investment will
generally take a stake in business.
b- Angel investors
Individuals, usually wealthy, who invest their own
money in a business for a share of the company.
c- Small business administration (SBA)
U.S. government agency that advises and assists small
businesses by providing management training and
financial advice and loans.
3- knowing your customer (marketing)

Market
Consists of people with unsatisfied wants and needs who
have both the resources and the willingness to buy.
4- Managing your employees.
5- Record keeping.

Ayman.shokry@telecomegypt.com

Ayman.shokry@telecomegypt.com