Enterprise Creation & Entrepreneurship

 Entrepreneurship
 General Economics
 Company Law

Section A. Entrepreneurship

1. What is entrepreneurship?
 This is the act of identifying a business idea and gathering resources to initiate
a business activity

2. The word entrepreneur comes from a French word______________ which means

_________________
 Entreprendre
 To undertake a business idea

3. Give 5 entrepreneurial traits?

 Confidence
 Passion
 Innovation
 Optimism
 Discipline

4. Give 5 entrepreneurial skills?

 Communication skills
 Leadership skills
 Management skills
 Problem Solving skills
 Time Management skills

5. What does an entrepreneur do?

 Creates Jobs
 Takes the risk of the business
 Makes decisions
 Provides resources
6. Give 3 roles of entrepreneurship to the following
a. Government
 Increases GDP
 Increases regional development
 Improves the B.O.P. deficit

b. Society
 Leads to increase in welfare
 Solves societal problems
 Brings about economic development

c. Organizations
 Develops management capabilities
 Increases capital formation

7. Give problems faced by entrepreneurs in Cameroon?

 High taxes
 Inadequate capital due to high cost
 Government policies
 Tribalism and Favoritism
 Lack of skilled labor

8. Give 4 solutions to problems faced by entrepreneurs?

 Creation of training centers
 Improvement of road networks
 Provision of solidarities by the government
 Introduction of entrepreneurial schools

9. Give 5 motivations of entrepreneurs?

 Desire to make profit
 Desire to solve problems
 Hobbies and talents
 Zeal to establishing an idea
 Family background

10. What is an entrepreneurial idea?

 It is an opportunity or problem which can be turned into a business venture
11. What is a source?
 Where to get ideas?

12. Give characteristics of a business idea?

 It must be innovate
 It must be market driven
 It must be fundable
 It must be realistic

13. Give 5 reasons why businesses close?

 Lack of strategy
 Inadequate financing
 Poor management
 Failure to understand the market or customer

14. Business are classified as small based on _______________

 Capital, labor force, output, revenue and size.

15. Small businesses are classified into_______ and ___________

 Small enterprises
 Micro enterprises

16. Give the characteristics of a small enterprise?

 It has capital between 1 million to 15 million with employee size of 1 to 9
employees

17. Give the characteristics of a micro enterprise?

 It has capital between 15 million to 50 million with employee size of 10 to 50
workers

18. Give 5 importances of small businesses?

 Promotes exports
 Complements larger businesses
 Creates employment
 Increase standard of living
 Easily meets consumer demand
19. Give 5 economic problems faced by small businesses?
 Inflation
 Taxation
 Barrier to exports
 Lack of technical resources
 Poor access to markets

20. Give 4 political problems faced by small businesses?

 Corruption
 Political Instability
 Poor assistance scheme management

21. What is a small business life cycle?

 These are stages that small businesses go through within their existence period.

22. Highlight the 5 stages of a small business life cycle?

 Launch Stage: When business starts and sales, net cash flow, profits are all
low.
 Growth stage: Sales, net cash flow and profits start take off. Mostly because of
consistent advertisements.
 Expansion stage: Here, sales, profit and net cash flow are still rising but at a
decreasing pace.
 Maturity stage: Here, the businesses growth is almost stagnant with little or no
noticeable change in sales, cash flow and profits
 Decline stage: here, the business starts to fall. Sales net cash flow and profits
start to fall.

23. Draw a diagram of a small business life cycle?

24. What is the key difference between innovation and entrepreneurship?
 Innovation refers to coming up with a business idea by applying creativity
while entrepreneurship involves turning a business idea into a profitable
business

25. Highlight the 3 types of innovation?

 Product Innovation: Involve making a new product, creating a new product
feature or enhancing current product features
 Process Innovation: Combination of methods and emerging technologies to
produce, market, deliver and support the product
 Business model innovation: A business wide transformation which completely
affects the business e.g. changes in management

26. What is the entrepreneurial process?

 It is the cause of action taken by an entrepreneur from when an idea is formed
till when the business is fully established

27. Highlight the stages of the entrepreneurial process?

 Idea generation
 Developing a business plan
 Resource gathering
 Launch the business
  Manage the business
 Harvesting from the business

28. What are the factors a business will face because of their legal form?
 How the company will be taxed
 The level of legal liability
 Level of responsibility of the owners
 Cost of formation
 Capital formed
 Ownership of the business

29. State the forms of entrepreneurial organization?

 Sole proprietorships
 Partnerships
 Limited liability companies
 Joint stock companies

30. What is a sole proprietorship?

 This is a one man business. This is a business undertaken by a single
individual.

31. Give the advantages and disadvantages of a sole proprietorship?

Advantages Disadvantages
Quick decision making Has 100% liability
Minimized formation formalities High risk of discontinuity
High level of secrecy Difficulty of insufficient funds
Business ownership is easy to transfer High risk of mismanagement
Owner enjoys all the profits alone

32. What is a partnership?

 This is a business undertaken by people ranging from 2 to 20

33. Highlight the 2 types of partners?

 General /Active partners: involved in day to day running of the business
 Limited / Sleeping partners: Contribute to the capital but not involved in the
day to day running of the business

34. Give the disadvantages and advantages of partnerships?

 Advantages Disadvantages
Better management than sole
Slow decision making
proprietorship
Higher privacy than LLCs Slow transfer of capital to third party
General partners have no limited
Entrepreneurs share the burden
liability
Less formal and legal obligations than
LLCs

35. What is a limited liability company?

 This is a company made up of shareholders who come together and contribute
the capital of a business in order to undertake a business activity

36. The members of limited liability companies are called______

 Shareholders

37. Name the 2 types of limited liability companies?

 Private Limited Liability companies
 Public Limited Liability companies

38. Differentiate between the limited liability companies?

Public LLC Private LLC
Shares can be traded on the stock Shares cannot be traded on the stock
exchange market exchange market
Can start with at least 7 shares issued Can start with 1 share issued
Can have unlimited number of
Maximum of 50 shareholders
shareholder

39. What do you understand by “Limited Liability”?

 It means if the business suffers debts, the shareholder’s personal assets will not
be affected.

40. Give the advantages and disadvantages of limited liability companies?

Advantages Disadvantages
Shareholders have limited liability Startup capital is usually high
Low privacy and secrecy especially
Business is separate legal entity
for Public
Easy shares transfer (especially for
Slow decision making
Public )
 High chance of business continuity
It has a limited lifespan of 99 years
upon absence of shareholders
High possibility of raising large
capital
Better resource management

41. State the 4 main stages of formation of a limited liability company?

 Formation stage: idea generation and pursue for necessary resources
 Incorporation stage: Acquisition of necessary documents. Private LLCs can go
operational at this stage
 Subscription stage: Shares are given out the general public
 Commencement Stage: Declaration is made that minimum number of shares
have been paid for. A statutory is signed by competent authority that all
conditions have been fulfilled and a certificate of commencement is issued to
the company to go operation

42. What are the documents required at the Incorporation stage?

 Memorandum of Association: States objectives, rights, privileges and power of
business.
 Article of association: Contains rules and regulations governing the internal
workings and management affaires of the company.
 Prospectus: Document inviting the general public to subscribe for shares.
Contains list of directors and their details, location and address of office, filing
fee and payment of duties and shared capital. A declaration proving that
registration has been done in accordance with laid down regulations and
provisions of company ordinances

43. What is the constitution of the company?

 Constitution = Article of association + Memorandum of association

44. What is a business startup?

 This is a newly formed business

45. What is a business plan?

 It is a detailed document showing how a company will achieve its goals

46. Highlight the 6 purposes for creating a business plan?

 Maintain business focus
  Secure outside financing
 Fueling ambitions
 Mapping growth
 Enlighten executive talent
 Measurement and progress monitoring

47. Highlight the different types of business plan?

 Summary / Mini Plan
 Complete/ investment Plan
 Operational / strategic plan
 Start up business plan
 Growth business plan

48. What are the 7 main parts of a business plan?

 Executive Summary: This is the first section of the business plan and also the
last part to be written. It briefly introduces the business, the product, current
position, target position, financial overview, past achievements and future
goals

 Company Description: Here, we explain precisely what the business does, its
services, the market it operates. It must include a mission statement, the goals
of the company, industry, target audience, structure of the business,
competitors, market and suppliers

 Market Analysis: A quantitative and qualitative description of the market. It

highlights the market size, volume and value. It must include a description of
the industry, the market, the competition, barriers to entry and market entry test
results.

 Competitive Analysis: Here you analyze both present and future competitors in
full detail. Highlight the strengths and weaknesses of the business. It must
include information on the strength of competitors, their weaknesses, their
objectives, how to seize their market share, how to respond if they leave and if
new competition shows up.

 Operations and Management plan: Highlights the people and processes that
allow the business to function. It must include the operational plan (e.g.
 production/service delivery, quality control, inventory, suppliers and location)
and Organizational plan i.e. An overview of the teams running the business
(e.g. their names, experience levels, salaries, etc.).

 Marketing and Sales plan: Here, we analyze how the market works and how
the business will position itself within its niche. It must include a definition of
the target market, and assessment of the current market, threats and
opportunities, pricing, product features, budget, target customers, etc.

 Financial plan: includes budgets, projections and goals unique to the business.
Explain assumptions on which forecasts were based off of. It must include a
profit/loss projection, cash flow forecast, breakeven analysis and capital
requirements.

49. What comes at the end of a business plan?

 The appendix
Section B: Company Law

1. What is company law?

 It is the branch of business law that governs and regulates the formation,
operation and governance of business organizations

2. Where and where was OHADA created?

 Port Louis (Mauritius) on 17th October 1993.

3. What does OHADA stand for?

 Organization Pour L’Harmonization en Afrique du Droits des Affairs
 Organization for the Harmonization of Business Law in Africa

4. Name the 17 member states of OHADA?

 Cameroon, Central African republic, Benin, Burkina Faso, Gabon, Mali, Niger,
Senegal, Guinea Bissau, Guinea Conakry, Congo, Comoros, Chad, Democratic
Republic of Congo, Congo Kinshasa, Ivory Coast, Equatorial Guinea

5. List the 5 OHADA Uniform Acts?

 Uniform Act on general commercial law
 Uniform Act on Securities
 Uniform Act on accounting and financing reporting
 Uniform Act on commercial companies and economic interest groups
 Uniform Act on collective proceedings on clearing debts

6. What is a commercial company?

 A commercial company is a legal entity which is brought into existence by the
process of registration of incorporation under the company legislation

7. Name the 4 types of commercial companies according to OHADA?

 Private Companies
 Sleeping Partnerships
 Private Limited Company
 Public Limited Company

8. Explain them?
 A private company is one where all the members are traders and have
unlimited liability for the company’s debts. It is run by a manager
  Sleeping partnerships: This is a partnership in which one or more of the
members are indefinitely liable for the company called active partners which
co-exists with one or more other members who are not liable for the debts of
the business called sleeping partners. It is managed by the active partners
 A private limited company is one where all members have limited liability and
are liable for the company’s debts up to the limits of their contributions. It is
run by a manger elected from amongst the partners.
 A public limited company: This is a company where the liability of each
shareholder is limited to the amount of shares he has in a company. It can be
run by a managing director or a board of directors

9. Differentiate between a public and private limited company?

Public LC Private LC
Run by a managing director or board of
Run by a manager
directors
Can sell assets on stock exchange Cannot sell assets on stock exchange
market market
Must appoint an auditor Is not obliged to appoint an auditor
Permitted to use bonds Not permitted to use bonds
All shares are freely transferable Has restrictions on share transferability

10. What is the minimum capital for private limited companies?

 1 Million FCFA

11. What is the minimum capital for public limited companies?

 10 Million FCFA. However, if it desires to sell assets on stock market,
minimum capital requirement becomes 100 Million FCFA

12. What is a sole proprietorship?

 This is a single person commercial entity as recognized by OHADA

13. What is a de facto partnership?

 This is a partnership which two or more entities act as partners without having
formed themselves into a commercial company

14. Discuss the concept of legal personality?

  It means that a business can be a separate legal entity from its owners. A
business aka a legal or artificial person gains its legal personality upon its
registration in the TPPCR

15. Give 5 consequences of Incorporation of a company?

 He company obtains a distinct legal personality from its members
 The company can sue and be sued in its own name
 The property of the company shall belong only to the company and not to any
of the members
 The company has the capacity to emerge in contracts in its own name
 The members of the company have limited liability

16. What is the article of association?

 It is one of the registration documents of a company. It is a document which
provides the internal rules and regulations of the company relating to the
company, sharing of dividend, disciplinary measures, etc.

17. According to OHADA, the memorandum and article of association are not
prepared separately, T or F?
 True

18. List the contents of the article of association?

 The form of the company
 The name of the company
 Objects of the company
 The company registered office
 Its duration
 The identity of the contributors in cash and for each of them, the amount of
contribution and the number and value of shares handed over to them in
exchange for the contribution in cash
 The identity of the contributors in kind and for each of them, the amount of
contribution and the number and value of shares handed over to them in
exchange for the contribution in kind
 The amount of the registered capital
 The amount and value of the share issued stating where necessary the value of
the share
  The provision relating to the distribution of profit, the contribution of reserves
and the distribution of bonuses after liquidation
 The rules governing the functioning of the company

19. What is the Ultra Vires Doctrine?

 The ultra vires doctrine prohibits a company from acting outside of its object
clause (the purpose for which a company exists). The term ultra vires means
“beyond the powers or capacities of”. Hence, the ultra vires highlights the
transactions that a business is permitted to engage in throughout its existence.

20. What is the aim of the ultra vires doctrine?

 To protect the interest of the investors and creditors

21. What do you understand by “Incorporation of a company”?

 Incorporation of a company means registration of a company. A company
comes into existence through a process of incorporation which issues to the
company a certificate of incorporation which gives the company a status
distinct from its members. This is described as having a “veil of
incorporation”. The members start to enjoy limited liabilities and when the
debts of the company are caused by any of the members, the veil of
incorporation is lifted and the members become liable for their debts.

22. What do you understand by “Lifting the veil of incorporation”?

 This is a situation where an incorporated business loses its state of
incorporation because it debts are caused by one or more of its members. Some
circumstances under which a veil of incorporation will be lifted are;
- If the company is engaged in wrongful or fraudulent trading
- If the company is a subsidiary to another
- If the companies are involved in a group fraud

23. What do you understand by dissolution of a company?

 This is a situation where the company’s name is wiped of the companies
register (TPPCR)

24. What do you understand by winding up of a company?

  This is a situation where all the assets of a company are sold to pay off its
debts. This is in cases of insolvency i.e. when the company is unable to pay its
debts. Winding up is aka Liquidation

25. Give some causes for the dissolution of a company?

 On expiry of the period of which the company was formed
 On the annulment of the company’s partnerships
 On the realization or extinction of its objects
 Through a court judgment or court order

26. What do you understand by “the majority rule” of a company?

 This refers to cases where company members all give their votes on different
decisions and the decision carrying the highest number of votes is implemented

27. What is arbitration?

 This is a system of solving contractual disputes in such a way that it does not
favor a particular party