Business students may hear the words “entrepreneur” and “CEO” being bandied about, and they soon find themselves asking, “How is an entrepreneur different from CEO?” These two terms describe different roles in business, but the tasks performed by the people in these roles often overlap. An entrepreneur is simply anyone who starts a business, no matter how simple it is. A window washer who goes into business for himself is an entrepreneur, and if he wants to call himself the chief executive officer of his business, he is free to do so. It’s not necessary for him to become a limited liability company, or LLC, to name himself the CEO, but if he envisions a window washing empire in his future and decides to incorporate his business, he’s required to hire a president and CEO.
The Difference Between an Entrepreneur and a CEO
A corporation is a legally different entity than an LLC, and most small-scale entrepreneurs protect their businesses by becoming LLCs. According to Start Up Guide, it’s more expensive to become a corporation, but it’s the correct move to make for businesses that want to expand and perhaps go public in the future. There are different tax structures and regulations for corporations than for LLCs, and in general, they’re more complex and expensive to run. Corporations are required to have a board of directors, including a president and CEO, and they often have several more top-level executives occupying the so-called C-suite, or chief suite. A lot of times, entrepreneurs who found corporations hire themselves as CEO, because they are the ones with the vision for how to run the company.
This vision is the main requirement for being a CEO, and it comes with many years of experience and often a level of expertise in an industry. For example, Mozilla briefly hired Brendan Eich to be the CEO, because of his decades of experience in Web technology and his credit for developing the JavaScript programming language. Unfortunately for Mozilla and for Eich, his political views caused outrage among Mozilla users and led to his replacement. Eich is a computer scientist and an upper-level business executive, but he’s not an entrepreneur. It’s quite common for CEOs not to be entrepreneurs, and a common path for business graduates to take to this position is to get an MBA and work in a corporate environment for many years.
Upper-Level Executive Management Positions
The CEO can hold other executive management positions, such as chief operating officer or chief financial officer, before being appointed as the CEO. Companies often hire CEOs based on their reputations for leadership or for turning failing businesses around. For example, the clothing retailer J.C. Penney recently hired Marvin Ellison to be CEO when his contract with Home Depot ends. J.C. Penney has had major financial difficulties, and Ellison is famous for bringing companies back from the brink of failure. Being a Fortune 500 CEO is a glamorous job that requires devoting 15 to 20 years to a company and working your way up the corporate ladder, according to Forbes.
Related Resource: Small Business Loan
Entrepreneurs are the small business owners that create jobs in the economy, but most entrepreneurs are not CEOs. Starting a business requires personal financial risk, while becoming a CEO requires years of business experience. The next time you find yourself wondering, “How is entrepreneur different from CEO,” consider the laws and regulations governing corporations and small businesses.
