8.1 Types of Businesses Identify and describe the roles and functions of various economic institutions and business organizations.

Introduction Questions What role does organized labor play in protecting workers and how does it impact prices and consumers? How does the government protect consumers and small businesses and ensure fair competition? How do sole proprietorships contribute to the spirit of the United States’ economic system?

Types of Business Sole Proprietorship Partnership Corporation

Sole Proprietorship The most common form of business organization in the United States is the sole proprietorship. It is a business owned and operated by one person. A proprietorship is the easiest form of business to set up. Anyone can start a proprietorship whenever they want to. Sole proprietors fully own the business and receive all the profits. They can make decisions quickly, without having to consult others.

Hot-Diggity-Dogs would be a sole proprietorship

Sole Proprietorship and Unlimited Liability However, the owner has unlimited liability—the owner is financially responsible for all debts of the business. The owner’s personal assets may be seized to pay the debts. Sole proprietors may also have trouble attracting qualified employees because they may not be able to offer the same salaries and benefits that larger firms offer.

A small business owner can lose everything if the business fails. Discussion Question If a sole proprietorship fails, how are the debts of the business paid? Explain. A small business owner can lose everything if the business fails.

Partnership A partnership is a business owned by two or more people. Partnerships can raise money more easily by borrowing or adding new partners. Like proprietors, partners pay no corporate income tax. Partners bring a range of talents to the business. Partners have unlimited liability. Each is fully responsible for all business debts.

Discussion Question How would a business benefit from having partners with different talents?

Corporation A corporation is a business that has many of the rights and responsibilities of individuals. It can own property, sue, and be sued. It must pay taxes, but cannot vote. A corporation starts with a charter—a government document granting permission to organize. It describes the business and specifies the amount of stock, or ownership shares of the corporation, that will be issued. The stockholders who buy the shares own the business.

Corporations (Cont.) Corporations can raise money by selling new shares of stock. They can also borrow more easily than can proprietorships or partnerships. The ease of raising capital enables them to grow very large. Professional managers run corporations. If the managers do not succeed, the board can replace them. Ownership can be easily transferred by simply buying and selling stock.

Stock Certificates

Corporations and Limited Liability Corporations have limited liability. Only the corporation, not its owners, are responsible for the debts of the business. Individual stockholders can lose no more than the amount of their investment. Owners have little say in the management of the corporation.

The Stock Market The stock market is where you can buy and sell stocks. Wall Street in NYC is where the largest stock exchange is. If you buy stock, then sell it to make a profit, you receive a dividend. A dividend would be any profit you make from the sell of your stock.

The New York Stock Exchange on Wall Street is the largest market in the World.

Top Corporations in the US 1. Wal-Mart Stores 2. Exxon Mobil 3. General Motors 4. Chevron 5. Conoco Phillips 6. General Electric 7. Ford Motor 8. Citigroup 9. Bank of America 10. American International Group

Franchise A franchise is also known as a chain store. The stores are relatively the same no matter where they are.

How much say does an owner have in a corporation? Discussion Question How are owners of a corporation taxed differently from owners of proprietorships or partnerships? How much say does an owner have in a corporation?