There are key differences between starting a business and founding a startup. While both experiences seem very similar, the biggest difference is the scope of the company. When starting a small business, most of the time the idea is to stay small. Small businesses are often operated as sole proprietorships and limit their growth. They rely on simple startups, without extensive paperwork, or registrations.
Entrepreneurs are often mistaken with small business owners, when founding startups. However, the difference with these business owners is in the legality of the business. When a startup plans to grow and becomes an LLC or Corporation (C or S), the company is registered as such. Entrepreneurs tend to “bite of more than they can chew”, in the risks they take. These individuals are people who “organize and operate a business or businesses, taking on greater than normal financial risks to do so”. Meanwhile, small business owners focus on one company, that they hope to gain profits from the success of. While both operate their own businesses, one has more room for growth but increased risk for losses, as well.
The next question to ask, is what it takes to be an entrepreneur. Would the startup be considered an enterprise? The answer to this can be found in the definition of “enterprise”. Specifically, the second definition which states, “a unit of economic organization or activity especially: a business organization”. By this definition, an entrepreneur’s startup would be considered an enterprise, once registered as a business. The risks an entrepreneur takes fall in line with the first definition, “a project or undertaking that is especially difficult, complicated, or risky”. By this definition, the entrepreneur has begun a startup enterprise, when first planning their business.
Now to look at the differences, between being a founder, and being the owner. Founders are anyone with direct involvement in the startup of a company. While the owner is automatically known as a founder, not all founders own rights to the company. Stakeholders, who invested in the startup, but with no involvement in the operations of the company, would be considered founders. While the title of “owner”, or “CEO” can be passed along, to new leadership, founders are cemented, and will not lose that title. New ownership does not carry the title of founder.
In conclusion, Small business owners and Entrepreneurs are both considered founders. However, due to the risks they take, entrepreneurs leave more room for growth, in their company. Small business owners stick to sole proprietorships, while entrepreneurs lean more towards LLC and Corporation based enterprises. The difference is in the legal registration, of their companies.
Enterprise. (1828). Retrieved from Merriam-Webster: https://www.merriam-webster.com/dictionary/enterprise
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Russ, J. (2020, 11). What Are the Advantages of the Sole Proprietor to Small Businesses? Retrieved from Chron: https://smallbusiness.chron.com/advantages-sole-proprietor-small-businesses-23044.html
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