Splash Screen Chapter 3 Business Organizations

2 Contents CHAPTER INTRODUCTION SECTION 1Forms of Business Organization SECTION 2Business Growth and Expansion SECTION 3Other Organizations CHAPTER SUMMARY CHAPTER ASSESSMENT Click a hyperlink to go to the corresponding section. Press the ESC key at any time to exit the presentation.

3 Chapter Introduction 1 Economics and You Do you work at a business? Belong to a church? Participate in a club? Chances are these institutions play a significant role in your life. Click the Speaker button to listen to Economics and You.

4 Chapter Introduction 2 Chapter Objectives Describe the characteristics of the sole proprietorship.  Understand the advantages and disadvantages of the partnership.  Describe the structure and features of the corporation. Section 1: Forms of Business Organization Click the mouse button or press the Space Bar to display the information.

5 Chapter Introduction 3 Chapter Objectives Explain how businesses can reinvest their profits to grow and expand.  Recognize the reasons that cause firms to merge.  Identify two different types of mergers. Section 2: Business Growth and Expansion Click the mouse button or press the Space Bar to display the information.

6 Chapter Introduction 4 Chapter Objectives Section 3: Other Organizations Click the mouse button or press the Space Bar to display the information. Describe nonprofit organizations.  Explain the direct and indirect role of government in our economy.

End of Chapter Introduction Click the mouse button to return to the Contents slide.

8 Section 1-1 Study Guide Main Idea Businesses may be organized as individual proprietorships, partnerships, or corporations.  Reading Strategy Graphic Organizer As you read about business organizations, complete a graphic organizer similar to the one on page 57 of your textbook to explain how the three types of business organizations differ from one another. Click the mouse button or press the Space Bar to display the information. Section 1 begins on page 57 of your textbook.

9 Key Terms –proprietorship  –unlimited liability  –inventory  –limited life  –partnership  –limited partnership  –bankruptcy  –corporation  –charter  –sole proprietorship  Section 1-2 Study Guide (cont.) Click the mouse button or press the Space Bar to display the information. Section 1 begins on page 57 of your textbook. –stock  –stockholder  –shareholder  –dividend  –bond  –principal  –interest  –double taxation

10 Section 1-3 Objectives After studying this section, you will be able to:  Applying Economic Concepts Unlimited Liability How is personal liability affected by the type of business owned? Study Guide (cont.) –Describe the characteristics of the sole proprietorship.  –Understand the advantages and disadvantages of the partnership.  –Describe the structure and features of the corporation.  Click the Speaker button to listen to the Cover Story. Click the mouse button or press the Space Bar to display the information. Section 1 begins on page 57 of your textbook.

11 Section 1-4 Click the mouse button or press the Space Bar to display the information. Introduction There are three main forms of business organizations in the economy today–the sole proprietorship, the partnership, and the corporation.  Each offers its owners significant advantages and disadvantages.

12 Section 1-4 Click the mouse button or press the Space Bar to display the information. Did You Know? In 1997 Dun & Bradstreet reported that corporation start-ups increased by 2 percent to reach a new high of 798,917. New corporations in Florida and New York represented 25 percent of that total.

13 Section 1-5 Click the mouse button or press the Space Bar to display the information. Sole Proprietorships A sole proprietorship is a business run by one person. It is the smallest type of business organization in size, yet the most numerous and profitable.

14 Section 1-6 Sole Proprietorships (cont.) The advantages to sole proprietorships are: ease of start-up; ease of management; owner gets all the profits; business itself pays no income taxes; taxes only on the owner’s personal income; psychological satisfaction of owning one’s business; ease of closing the business.

15 Section 1-6 Sole Proprietorships (cont.) The disadvantages to sole proprietorships are: the owner has unlimited liability; it is hard to raise financial capital; owner may not be able to hire enough personnel or stock enough inventory to operate efficiently; owner may have limited managerial experience; hard to attract qualified employees; business has limited life and legally stops existing when the owner dies or sell the business.

16 Section 1-10 Click the mouse button or press the Space Bar to display the information. Partnerships A partnership is a business jointly owned by two or more persons. It is the least and has the second smallest proportion of sales and net income.  General partnerships are a type of business in which all partners are involved in the management and finances. In a limited partnership, at least one partner is not involved in management. This partner may have helped to finance the business.

17 Section 1-10 Click the mouse button or press the Space Bar to display the information. Partnerships (cont.) Articles of the partnership document spell out how the partners divide up the profits or losses.  The advantages of partnerships are: the ease of start-up; ease of management; no special taxes on a partnership; easier to raise capital through bank loans or new partner; larger size aids efficient operations; easier to attract skilled employees.

18 Section 1-10 Click the mouse button or press the Space Bar to display the information. Partnerships (cont.) The disadvantages of partnerships are: partners are responsible for the acts of each and every partner, except in a limited partnership where the limits are spelled out; limited life of partnerships ends if a partner leaves; potential for partner conflicts.

19 Section 1-15 Click the mouse button or press the Space Bar to display the information. Corporations Corporations receive a charter, or government permission to create a corporation, which includes details about stock ownership.  A corporation is a business organization recognized by law as a separate legal entity with all the rights of an individual.  Investors who buy common or preferred stock in a corporation become owners of the firm.

20 Section 1-15 Click the mouse button or press the Space Bar to display the information. Corporations (cont.) The disadvantages of corporations are; a charter is expensive; ownership and management are separated so shareholders have little say in running the business; corporate income is taxed twice; subject to government regulation. The advantages of corporations are: ease of raising capital; professionals may run the firm instead of the owners (shareholders); owners have limited liability; business’s life is unlimited; easy to transfer ownership. 

21 Section 1-17 Click the mouse button or press the Space Bar to display the information. Corporations (cont.)

22 Section 1-19 Corporations (cont.)

End of Section 1 Click the mouse button to return to the Contents slide.