INNOVATION AND CREATIVITY TO AN ENTREPRENEUR

• Creativity is the ability to think and produce new and unique things and
Ideas.
• Creativity is the act of turning new and imaginative ideas into reality.
• It is the ability to look at the world in new ways, find hidden patterns, to
investigate connections between related and unrelated situations, creations
or events to generate solutions. E.G. Solar, Mobile Money, facebook, Apple,
Netflix, Amazon, Safeboda, jumiafoods, zoom, skype, songs, poems, books,
softwares, bitcoin, Online Forex,
• Innovation is the implementation of that creativity. i.e, we can conclude that
innovation is the introduction of new ideas, solutions, processes or product
to gain a competitive advantage that all businesses strive to achieve.
• Creativity is the capability or act of conceiving something original or
unusual.
•
 CREATIVITY AND INNOVATION
• Creativity is the most important key to innovation.
• The creative comes first before the innovation where the creativity is
implemented. The implementation stage of creativity is called
innovation.
• Todays innovative businesses are renewable energy, MacBooks,
Netflix, Amazon, IUEA Electric Boda, Shazam, Jumaifoods, Alibaba,
Uber, etc.
• Creativity and Innovation gives a competitive advantage and this
competitive advantage is key to compete in a local and global market.
• Mention other innovative businesses that you know?
• Next step to creativity & innovation is HARD WORK and HARD TIME.
• THERE IS NO RIGHT AND THERE IS NO WRONG WAY IN
CREATIVE JOURNEY.
 TYPES OF ENTERPRISES
• 1. Sole Proprietorship – One Man Business
• 2. Partnerships: Two or more people.
• 3. Private Limited Liability – Limited Liability
• 4. Public Limited Liability Company - PLC
• 5. Public Corporations – Government Companies
• 6. Non Governmental Organizations (Not for Profits)
 Sole proprietorship – One
Man takes the risk.
•A business owned and operated by one person.
•All Decisions are made by one person.
•It is a very convenient type of company especially for
Entrepreneurs that grow their enterprises from small.
Rolex stands, shops, retail outlets, clothes outlets,
mobile money shops, canteens stands etc.
 Advantages of sole proprietorships
•Easy and inexpensive to create.
•Unless you need certification or local permits, government intervention is
minimal in a sole proprietorship.
•Owner makes all business decisions & has control over all aspects of the
business.
•Most Creativity and new ideas can be applied conveniently by the
Entrepreneur because it is a sole proprietorship.
•Flexibility in scheduling to meet owner’s needs because of the one man nature
of business.
 Advantages of sole proprietorships cont.

•Owner receives all profits.

•Privacy – owner is the only one who knows details of the business.
•Ability to keep ideas, formulas, or recipes to the business.
•Ability to act quickly in making decisions – You do not need to check with others
because all decision making is with the Sole proprietor.
 Advantages of sole proprietorships cont.

•Tax advantages
• Business itself pays no taxes
• Taxes are paid as personal income of owner which is usually lower than corporate taxes (Which are
paid by companies).
• Many business expenses are deductible

•Easy to close/dissolve because it is a one man business

• Pay employees and creditors
• Sell your equipment
• Notify customers if possible
• No legal issues in dissolution
 Disadvantages of sole proprietorships
•Owner has unlimited liability for all debts and
actions of the business.
•Unlimited liability: The debts of the business may be paid from the personal assets of
the owner.
•If you cannot pay business debt with business income, bill collectors can take your
personal assets (home, car)
•Difficult to raise capital.
•Banks/lenders consider sole proprietorships to be a high-risk investment.
•Needs include paying employees, purchasing equipment & inventory & running the
business.
•Expansions can be delayed or halted causing you to lose business to your competition.
 Disadvantages of sole proprietorships
•Sole proprietorship (one man business) is limited by his/her skills and abilities.
•The business is limited to the work time or schedule of the owner.
•Abilities like money and skills are limited to what the one man can do.
•Uncertain longevity
•You are “IT” – illness or injury that prevents you from working may cause you to close.
•Bankruptcy or incarceration will dissolve your business
•The death of the owner automatically dissolves the business.
 Partnerships

A form of business ownership in which two or more people share the

assets, liabilities, and profits.
Its similar to Sole proprietorships but with more than one owner.
Examples: Baguma and sons, Hardware stores, supermarkets, Bars,
and any other business that has partners etc.
 Advantages of partnerships
•Fairly Easy & inexpensive to start
• May pay attorney/ lawyer if you want to develop a partnership agreement. Partnership Agreements
are important to have a successful partnership business.
•Combined resources
• Team with partners with different skills, experience, contacts, & capital.
• Sharing responsibilities makes business run more efficiently & smoothly.
• Increase in the amount of capital to run the business. Lenders may be more willing to lend or extend
credit to a partnership business.
•Decreased and Reduced Competition
• Combining like businesses will decrease or eliminate competition
 Advantages of partnerships cont.
•Reduced expenses.
• When two or more businesses combine, expenses are no longer being duplicated
• Ex. promotion, office space, supplies, utilities, reduced prices, economies of scales etc.
•Business losses are shared by all partners.
•The partnership does not pay income tax on profits.
• Each partner pays income tax on her/his individual share of the profit
 Disadvantages of partnerships
•Unlimited liability:
• Each owner in a general partnership has unlimited liability.
• Each partner can lose personal assets to pay business debt.
In a Limited Partnership:
The liability is limited to the amount invested in the business. This is possible where it is statred in the
Partnership deed.
•Limited Capital
• Although partners may bring more capital to the business than sole proprietors, it is still limited to
what each can contribute.
• Some lenders may still be reluctant to lend large amounts to a partnership.
•Difficulty in ending
• Withdrawing can be complicated if there is no written partnership agreement.
• By law, profits must be divided equally if no agreement
 Disadvantages of partnerships cont.
•Often times, Partnerships may lead to disagreements.
• May disagree on business goals, finances, responsibilities, & division of profits.
• Can affect the efficiency of the business, morale of employees, & success or failure of the venture
etc.
•Developing a detailed partnership agreement often helps resolve the conflict because it addresses many
issues that cause potential disagreements.
• A limited partnership is more formal & specific in nature & is governed by the law because it is stated
in the Partnership Agreement.
 Disadvantages of partnerships cont.

•Uncertain life/Transferability
• Unless specified in a detailed partnership agreement, bankruptcy, death of
a partner & the withdrawal or admittance of a new partner dissolves the
partnership.
• Remaining partners may start a new partnership if they have the money to
buy the former partner’s share of the company.
 What is a Private Limited Liability Company?
• A Private Limited Company is formed lawfully with Limited
Liability or Legal Protection for its shareholders but that places
restrictions on its ownership.
• A Private Limited Company is a company which is privately held
for small businesses. The liability of the members of a Private
Limited Company is limited to the number of shares respectively
held by them. Shares of Private Limited Company cannot be
publicly traded.
• Private Limited Company is the simplest and a very popular
form of Business Registration. It can be registered with a
minimum of two people. Limited liability protection to
shareholders, ability to raise equity funds, separate legal entity
status make it the most recommended type of business entity
for millions of small and medium-sized businesses that are
family-owned or professionally managed.
 Minimum Requirement for Private Limited Company
• A minimum number of two Directors who are adults.
• One of the Directors of a Private Limited Company has to be a
Citizen and Resident.
• The other Director(s) can be a Foreign National.
• It is also required to have two Shareholders of a company.
• The Shareholders can be natural persons or artificial legal
entities.
 Advantages of Private Limited Company (LTD)
• No Minimum Capital
• No minimum capital is required to form a Private Limited
Company. A Private Limited Company can be registered with a
mere sum of 1,000,000 as total Authorized Share capital.
• Separate Legal Entity
• A Private Limited Company is a separate legal identity in the
court of the law, meaning assets and liabilities of the business
are not the same as the assets and liabilities of the Directors.
Both are counted as different. A Private Limited Company
separates Management and Ownership and thus, managers are
responsible for the company’s success and are also answerable
for the company’s loss.
• Limited Liability
• If the company undergoes financial distress because of
whatsoever reasons, the personal assets of members will not
be used to pay the debts of the Company as the liability of the
person is limited.
• For e.g. If a Private Limited Company takes any loan and is
unable to pay it off, the members are responsible to pay only
that much how much they own towards their own shareholding
i.e. the unpaid share value. This means, if you have no balance
payable towards the number of shares you hold, you are not
payable towards any debt payable by the company even if the
debt/credit amount remains unpaid.
• Fund Raising
• A Private Limited Company is the only form of business except
for Public Limited Companies that can raise funds from Venture
Capitalists or Angel investors.
• Free & Easy transfer of shares
• Shares of a company limited by shares are transferable by a
shareholder to any other person. The transfer is easy as
compared to the transfer of an interest in a business run as a
proprietary concern or a partnership. Filing and signing a share
transfer form and handing over the buyer of the shares along
with a share certificate can easily transfer shares.
• Uninterrupted existence
• A Private Limited Company has ‘Perpetual Succession’, which is
continued or uninterrupted existence until it is legally dissolved.
A company, being a separate legal person, is unaffected by the
death or other departure of any member but continues to be in
existence irrespective of the changes in membership. ‘Perpetual
Succession’ is one of the most important characteristics of a
company.
• FDI Allowed
• In a Private Limited Company, 100% Foreign Direct Investment
is allowed that means any foreign entity or foreign person can
directly invest in a Private Limited Company.
• Builds Credibility
• The particulars of the company are available on a public
database. This improves the credibility of the company as it
makes it easy to authenticate the details.
 Disadvantages of a Private Limited Company
• One of the main disadvantages of a Private Limited Company is
that it restricts the transferability of shares by its articles.
• In a Private Limited Company the number of shareholders, in
any case, cannot exceed 50.
• Another disadvantage of a Private Limited Company is that it
cannot issue prospectus to the public.
• In the stock exchange shares cannot be quoted because it is
not on the stock exchange. The valuation is subjective to the
owners, Auditors and valuation experts.
 Public Limited Company
• A public limited company is one of the most common business
structures. The business structure involves the public offering of
its shares to public investors. This is the main difference
between a public limited company and a private limited company
which usually has shareholders who are also members of the
management team and accountants are required. Public limited
companies, on the other hand, can have numerous public
investors in addition to a small number of individuals who run the
business day-to-day.
 Advantages Of A Public Limited Company
(PLCs) share benefits as (LTD). PLCs have some specific features
give them some unique advantages, such as:
• Raising Capital Through Public Issue Of Shares
• This is the main advantage of a public limited company. A public
company can raise money by issuing shares to the public. It can
also get a loan from a bank or other financial institution by
pledging its assets as collateral. It offers investors the
opportunity to own shares in the business. This can provide
liquidity for shareholders as they can sell their shares on an
open market. In addition, public companies are subject to greater
levels of scrutiny from the public, which means that the public
can have greater confidence in their management team.
• Widening The Shareholder Base And Spreading Risk
• Offering shares to the public allows a company to spread the
risk of ownership among a lot of people. This is important for
expanding or starting a new venture. It allows the company
raise money, which can be used for growth, settling debts and
expansion.
• Other Finance Opportunities
• Public companies access to a range of financial instruments.
This is because public companies are subject to greater levels
of scrutiny from regulators and the public. A PLC issues shares
and can also get a loan from a bank or other financial institution
• Growth And Expansion Opportunities
• A public limited company is one of the most common ways for
smaller companies to go public. They can raise funds for
expansion by selling shares to the public and raising money
through debt. In addition, public companies have more
accountability in their operations and proper management
structure than smaller private companies do.
• Prestigious Profile And Confidence
• A public limited company is seen as a prestigious status symbol.
It gives the public confidence in your company and can increase
public awareness of your business.
• Transferability Of Shares
• A PLC has public shareholders who can buy, transfer or sell
shares in the company without having to ask for permission
from the directors. This is known as ‘transferability of shares’
and it allows public companies to attract investors more easily
than private companies, which have restrictions on share
transfers according to their articles.
• Exit Strategy
• If you own a public limited company and want to get out of it for
some reason, you can sell your shares on the public market.
This is a good way to make money from an investment as well
 Disadvantages Of A Public Limited Company
• Public companies have some disadvantages over private
companies because they are subject to greater levels of scrutiny
from regulators and the public. The public can see how much
money is being spent on things like salaries, bonuses,
advertising, etc. which makes it hard for PLCs to hide their costs.
• More Regulatory Requirements
• The public limited company is subject to more regulations than
private companies. These include disclosure of financial
information and reporting requirements with Companies House
(UK). The public limited company must also hold an Annual
General Meeting (AGM) each year where shareholders vote on
important matters such as whether or not to declare dividends.
• Higher Levels Of Transparency Required
• A public limited company is subject to greater levels of scrutiny
from regulators and the public, which means that they have
more accountability in their operations and management
structure than smaller private companies do. This includes
disclosing financial information and reporting requirements with
Companies House (UK). The public limited company must also
hold an Annual General Meeting (AGM) each year where
shareholders vote on important matters such as whether or not
to declare dividends.
• Ownership And Control Issues
• When a company is private, the shareholders are usually people
who are known to the directors or founders. The company will be
selective about who to let become a shareholder, making sure
they support the vision and plans for the business. When new
shares are issued, pre-emption rights allow existing
shareholders to maintain control over the company.
• When a company is public, it is much harder to control who
owns the company and what the directors are responsible for as
compared to a private limited company. This means that the
original owners or directors can lose control of the company,
have disputes, or spend a lot more time managing shareholder
expectations.
• Institutional shareholders can have a lot of influence on a
company. They often expect to be consulted about the
company’s policies and to have standards that they set to be
adopted.
• More Vulnerable To Takeovers
• A public limited company is more vulnerable to takeovers than a
private company because public companies have shares that
can be bought or sold on the public market. This means that
anyone with enough money could buy out a public limited
company (which is known as a ‘hostile takeover’) and take over
management of it.
• Short-Termism
• Research has shown that public companies tend to focus more
on short-term profits than private companies do.
• This is because public companies have to answer to their
shareholders every three months and they can be taken over if
they don’t make a profit. Private companies, on the other hand,
can take a longer-term view of things since they are not under as
much pressure from the public.
• Initial Financial Commitment Is Higher
• A public limited company must make an initial public offering
(IPO) of shares. This is when the company sells its first batch of
stock, which allows it to raise money for growth and expansion
purposes.
 Conclusion
• In conclusion, public limited companies have a number of
advantages, including the ability to raise money through
an initial public offering (IPO) and the prestigious profile
that comes with being a public company. However, they
are also subject to greater levels of scrutiny and
regulation, which can be onerous for some businesses.
They are also more vulnerable to takeover bids, meaning
that they can be less focused on the long-term than
private limited companies
PUBLIC CORPORATIONS
• Public corporations are also referred to as state-owned
enterprises and nationalized industries. Such
corporations are owned by the government, as the
business must register securities in the stock market
before selling to the public.
• After Independence, for the development of the country, it
became necessary for the Government to start public
sector enterprises.
• Organizational framework is needed for the Government’s
participation in the business and economic sectors of the
country to function. In the Public Sector, Government
plays a major role in organizing and formulating the key
points related to an organization. These public enterprises
are owned by the public and accountable to the public
through the parliament. A public enterprise may take any
particular form of organization depending upon the nature
of its operation and its relationship with the Government.
Features of Government Company

• 1. Separate Legal Entity: A Government Company has a

separate legal entity independent of the Government. It
means that the company can acquire property, enter into
a contract, can sue another company by filing a suit
against them in a court of law, or can be sued by other
companies.
• 2. Incorporation: A Government Company is registered
under the Companies Act, 2013 or any previous Company
Law, and is governed by its provisions. It is formed by an
executive decision, instead of a legislative decision.
• 3. Management: The Government nominates the Board of
Directors who manage the company and its activities. Also, like
any other Public Limited Company, a Government Company’s
management is regulated by the provisions of the Companies
Act, 2013.
• 4. Governed by Provisions of Memorandum and Articles of
Association: The main documents of a Government Company
includes the Memorandum of Association and Articles of
Association. These documents contain information like rules and
regulations of the company related to the appointment of
employees, objects of the company, etc.
• 5. Accounting and Audit Procedures: Unlike Departmental
Undertakings, a Government Company is free from audit,
budgetary, and accounting controls. However, the auditor
appointed by the Central Government has to present an Annual
Report in front of the State Legislature or Parliament.
• 6. Finance: The State or the Central Government contributes at
least 51% of the capital of a Government Company, and it can
raise the rest of the capital from the capital market
• Merits of Government Company
• 1. Easy Formation: A Government Company can be easily
established by just fulfilling the requirements of Companies Act.
It means that one does not have to acquire separate legislation
from the Parliament for the formation of a Government
Company.
• 2. Operational Autonomy: There is no bureaucratic control and
political interference of the Government in the management of
the Government Company; therefore, a Government Company
takes actions according to their own judgment and can manage
its activities independently.
• 3. Independent Status: As a Government Company has a
separate legal entity, independent of the Government, it can
perform its activities just like any other Private Company.
• 4. Prevents Unhealthy Business Practices: As a Government
Company exercises major control of Government on its
management, the goods offered by these companies are of
good quality and are sold at reasonable prices. This merit of a
Government Company helps in controlling the market and
reducing unhealthy business practices.
• Demerits of Government Company
• 1. Freedom only in name: As at least 51% of the shares of a
Government Company are held by the Government, therefore
the control over the affairs of the company by the Government is
more. Besides, the provisions of the Companies Act, 2013 do
not have much relevance in this case.
• 2. Lack of Accountability: As the major part of the capital of a
Government Company is financed by the Government, it should
be held accountable to the Government only. However, because
of the ineffective control of the Government, a Government
Company is not directly answerable to the Parliament.
• 3. Defeats the main Purpose: Government exercises
major control over the functions and management of a
Government Company, as it is a major shareholder of the
company. However, this feature of the Government
Company defeats the whole purpose of registering and
establishing it under the Companies Act.
 Suitability of Government Company

• The establishment of a Government Company is suitable in

three cases as follows:
• Where Government’s planning and funding are required in a big
project.
• Where the Government of the country wants to have control over
a company without its nationalization in the private sector.
• Lastly, where the Government of the country wants to launch an
organization by collaborating with some private organizations.
 Advantages
• They have the ability to experiment freely with innovative
approaches and, if necessary, to take risks.
• They are flexible in adapting to local situations and responding to
local needs and therefore able to develop integrated projects, as
well as sectorial projects.
• They enjoy good rapport with people and can render micro-
assistance to very poor people as they can identify those who
are most in need and tailor assistance to their needs.
• They have the ability to communicate at all levels, from the
neighborhood to the top levels of government.
• They are able to recruit both experts and highly motivated staff
with fewer restrictions than the government.
• Disadvantages
– Paternalistic attitudes restrict the degree of participation in
programme/project design.
– Restricted/constrained ways of apporach to a problem or area.
– Reduced replicability of an idea, due to non-representativeness
of the project or selected area, relatively small project
coverage, dependence on outside financial resources, etc.
– "Territorial possessiveness" of an area or project reduces
cooperation between agencies, seen as threatening or
competitive.