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Entrepreneurs or Small Business Owner?

April 10, 2017

Just because you own and operate a small business doesn’t make you an entrepreneur.  A study published in an issue of the Quarterly Journal of Economics revealed a key difference between being self-employed and an entrepreneur.  Researchers found that a business’s legal status, whether it is incorporated or unincorporated, is what separates entrepreneurs from other small business owners.

The study found that incorporated business owners tend to start ventures that are entrepreneurial and require high level skills, while unincorporated business owners typically start businesses that demand manual talents.

The researchers said an example of an entrepreneur or incorporated business owner may start a digital advertising agency or a mobile app business.  An unincorporated business owner might be a plumber, contractor or truck driver.

According to Ross Levine, one of the authors of the study and a professor at the University of California at Berkley said people often think of entrepreneurs as someone who creates something unique, non-routine or risky.  He goes on to say, “We found that people who open such businesses tend to open incorporated businesses.  While those who open businesses that perform fairly routine activities, tend to have less formal education and open unincorporated businesses.”

The study also found that having an incorporated status provides business owners with some added legal protections, which often provides them a little more freedom to delve into larger or riskier ventures than unincorporated business owners.

Levine said, “We found that over time incorporated business owners are more likely to describe themselves as entrepreneurs than unincorporated business owners.”

Researchers found that before starting their own company, incorporated entrepreneurs exhibited greater self-esteem, wanted to be more in charge of their futures, were usually involved in jobs that primarily rely on intellect and were likely than salaried workers to come from high earning families with two well educated parents.

In addition, the researchers discovered that incorporated entrepreneurs are more likely to have many employees while unincorporated business owners have few or no employees.

In either case, the Angelo State University · Small Business Development Center is here to provide technical business assistance to anyone who wants to start or expand a small business in San Angelo and the Concho Valley.

 “Business Tips” was written by Paul Howard, Certified Senior Business Advisor of Angelo State University’s Small Business Development Center.  For more information on the topic of this article or the services of the ASU · SBDC, contact him at Paul.Howard@angelo.edu. 

 

 

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