Business Organizations

Business organization establishment formed to carry on commercial enterprise

Sole Proprietorship a business owned by one person Characteristics… EEarns all profits RResponsible for all losses 775% of all businesses OOnly generate 6% of sales UUsually in the service industry DDefault business structure

Hair Salon Lemonade stand

Advantages Disadvantages EEasy to start up AAuthorization- must obtain a business license SSite permit NName- register name of business FFew regulations ZZoning laws HHealth codes  G G et all the profits! EEasy to discontinue (not a complicated business structure) UUnlimited p ersonal liability LLimited access to resources PPaying for the equipment all by yourself NNot enough workers LLack of permanence BB/c so easy to discontinue

owned by 2 or more people who agree on a specific division of responsibilities and profits--- Often called a Partnership Agreement partners share equally in responsibility and liability

EEase of start up RRUPA- Revised Uniform Partnership Act Ordering common ownership interests, profits and loss sharing, and shared management responsibilities SShared decision making UUsually in finance, insurance, and real estate LLarger pool of capital AAssets AdvantagesDisadvantages UUnlimited liability PPotential for conflict

CORPORATION legal entity owned by stock owners

More spread out in services, retail, finance, insurance, and real estate Structure- stock holders elect a board of directors Separate legal entity (Can sue/ be sued) Characteristics

Name Statement of purpose Longevity of corp. For perpetuity- w/o limit Founders’ name and addresses Business headquarters address Method of fund-raising Rules for corp.’s management Par value of stock Articles of Incorporation

Closely held corporations- issue stock to only a few people, usually family members Publically held corporations- sells stocks on the public market

Advantages Disadvantages Limited liability for owners Transferable ownership- stockholder advantage Ability to attract capital- corporation advantage Ability to hire experts rather than rely on their own knowledge Long life- unless there is a specific termination date, corp. can continue Difficulty and expense of start- up Double taxation Tax on corporation income Tax on dividends Tax on selling shares- capital gains tax Loss of control Owners don’t necessarily control the running or the decisions of the corp. More regulation SEC- securities and exchange commission

Horizontal mergers Vertical mergers Conglomerate Multinational corporation

Join 2 or more firms competing in the same market with the same good/service Possible monopoly could arise Horizontal Mergers

Join 2 or more firms involved in different stages of producing the same good or service Vertical Mergers

merging more than 3 firms that make unrelated products

Large corporation that sells goods and services around the world Must obey laws and pay taxes in each country in which they operate Multinational Corporation

PProvide jobs and products around the world SSpread new technologies and production methods UUnduly influence the culture and politics of the country in which they operate CConcern about low wages and poor working conditions in poorer countries AdvantagesDisadvantages

THE BUSINESS POPULATION Business Shares of Domestic Output Corporations20% P artnerships 5% SoleProprietorships75% Partnerships 8% Corporations90% Percentage of FirmsPercentage of Sales Farmer Sole Proprietorship 2%

Franchise Nonprofit Organization Cooperative Organization

Semi-independent business that pays fees to a parent company in return for a contract for exclusive rights to sell a certain product or service Franchise

owned and operated by a group of individuals for their shared benefit Cooperative Organization “The Co-Op”

Labor unions - organized group of workers whose aim is to improve working conditions, hours, wages, and fringe benefits In the business of benefitting society, tax-exempt, YMCA, religious organizations, etc Professional organization - improve the image, working conditions, and skill level of people in a particular occupation, ABA Business associations - promotes collective business interests for an area or for a group of similar businesses, BBB Nonprofit organizations Trade associations - promotes interest of a particular industry, American Marketing Association

Business License: permits issued by government agencies that allow individuals or companies to conduct business It is the authorization to start a business issued by the local government. Zoning Law: Local government laws that dictate how property can and cannot be used in certain areas. Zoning laws limit commercial use of land in order to prevent oil, manufacturing or other types of businesses from building in residential neighborhoods

Liability: A company's financial debt or obligations that arise during the course of its business operations. Fringe Benefit: Compensation in addition to direct wages or salaries, such as company car, house allowance, medical insurance, and paid holidays, Some fringe benefits are regarded part of a taxable income. Assets: A piece of property or equipment purchased exclusively or primarily for business use. Different categories: current and non-current, short-term and long-term, operating and capitalized, and tangible and intangible.

Stock: A type of security that signifies ownership in a corporation and represents a claim on part of the corporation's assets and earnings. Bond: A debt investment in which an investor loans money to an entity (typically corporate or governmental) which borrows the funds for a defined period of time at a variable or fixed interest rate.

Articles of Incorporation: A charter to establish a corporation in the United States and are filed with the Secretary of State. Dividends: A sum of money paid regularly (typically quarterly) by a company to its shareholders out of its profits. Royalties: A sum of money paid for the use of a patent or to an author or composer for each copy of a book sold or for each public performance of a work.