Types of Business Organization

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Presentation transcript:

Types of Business Organization Sole Proprietorship Partnerships (Limited/Gen) Corporations Types of Business Organization

Finding the Right Business Structure Types of Business Organization Organizing a Business The three main types of business organizations are: Sole Proprietorships Partnerships Corporations https://www.youtube.com/watch?v=A-Up-JUkaj0 Finding the Right Business Structure

U.S. Sole Proprietorships, Partnerships, and Corporations Types of Business Organization U.S. Sole Proprietorships, Partnerships, and Corporations

Sole Proprietorship & Partnership We Will: Identify advantages and disadvantages of sole proprietorships and partnerships I Will: Identify characteristics of each business type

Terms to Know What is liability? the state of being responsible for something, especially by law

Terms to Know sole proprietorship a business owned by one person unlimited liability when the owner is responsible for the company’s debts partnership a business owned by two or more people who share its risks and rewards

Sole Proprietorship- 72% of businesses

Sole Proprietorship a business owned by one person Remember: About three-quarters of all businesses in the United States are sole proprietorships.

Mark Cuban… Being an entrepreneur

Advantages Ease of start up and manage You keep all profits (YOU are in CHARGE) You keep all profits Lower taxes Ease of exit

Weakness Unlimited Liability Difficulty in raising financial capital Limited size and efficiency Limited access to credit Limited Life

Successful Sole Proprietorships

Successful Sole Proprietorships Yearly Revenue: $3,000,000,000 + Total Employees: 60,000  Houston-area employees: 10,750  Year Founded: 1980  Top Executive: Tilman J. Fertitta Business: Dining, hospitality, entertainment and gaming less

Stop and Think If you started your own business what would it be? What are some of the 4 Factors of production you would need. 2 examples for each Land Labor Entrepreneur Capital

5% of businesses

Partnerships Two major types of partnerships: General Partnership: (most common type) all partners are responsible for management and the financial responsibilities of the partnership. Limited Partnership: at least one partner is not active in the day to day running of the business. They have limited liability. Articles of Partnership: contract between partners spelling out the rules of partnership. Dividing profit Dividing responsibility Admitting new partners Buying out partners

Partnership Partnerships Advantages of Partnerships: Easy to start Easy to Manage: not dependent on one person, each partner has different things to offer No special business taxes Easier to raise financial capital/credit Larger than sole proprietorship Easier to attract qualified workers

Partnership Partnerships Disadvantages Unlimited liability Limited partner is only responsible for his initial investment. He has limited liability. Limited Life Conflict between partners

Successful Partnerships Successful Partnerships Video

Successful Partnerships Harry, Albert, Sam, and Jack Warner.

Successful Partnerships The company was founded in a one-car garage in Palo Alto by William "Bill" Redington Hewlett andDavid "Dave" Packard

Successful Partnerships Brothers Richard James "Dick" McDonald and Maurice James "Mac" McDonald  were American restaurateurs and entrepreneurs who developed and opened the first  McDonald's restaurant in 1940. 

Successful Partnerships Microsoft was founded by Paul Allen and Bill Gates

Successful Partnerships Co-founders Ben Cohen and Jerry Greenfield actually first met while running around a track in seventh grade gym class. “We were the two slowest, fattest kids in the class,”

What fits best with each business??? Tell me Why!!!

Decision Making? What is the difference between a Lets Assess… What is the difference between a Partnership and Sole Proprietorship? Ownership? Access to Capital & Credit? Decision Making?

Corporations We Will: Identify characteristics and explain how a corporation is formed I Will: Identify key characteristics of the daily operation of a corporation

Corporation Terms to know a company that is registered by a state and operates apart from its owners

Terms to know Limited Liability holding a firm’s owners responsible for no more than the capital that they have invested in it

Corporation- Set up Terms to know Charter: a document granted by the state giving a corporation the right to do business

Corporation- Set up Terms to know Stock: shares of ownership in the corporation A stock represents claim on a share of a corporation’s assets and profits. Stocks are typically riskier and long-term investments. Stockholders:(shareholders) owners of stock.

Corporation- Set up Terms to know Bonds: a debt investment in which an investor loans money to an entity (corporation) which borrows the funds for a defined period of time at a variable or fixed interest rate. Bonds are typically low-risk and good for short-term investments.

Stocks  and bonds represent two different ways for an entity to raise money to fund or expand their operations

Corporation- Set up Terms to know Reasons to own stock: Dividends: share of corporate profits paid to stockholders Speculation: buy in hope that price of stock will increase.

Corporations- 20% of Business 74%-profits

Stock https://www.youtube.com/watch?v=hCzIcS_xPiQ Stocks and Bonds 101 | Fidelity

Corporation- Ownership Common Stock is a basic share of ownership in a corporation Have voting rights in the management of the company In reality they turn over voting rights to someone else with a proxy: giving someone else the right to vote your share of stock. Preferred Stock: Non voting shares of ownership Guaranteed dividend Liquidation benefit: If corporation goes out of business they are ahead of common stockholders in getting back money. Board of Directors: duty to direct the corporations business by setting board policies and goals Elected by common stockholders Hires a professional management team to run day to day activities. (CEO, CFO….)

Advantages of a corporation: Corporations Advantages of a corporation: Ease of raising financial capital (main advantage) Selling stock to investors (ownership) Selling bonds: a written promise to repay a loan on a specific date (debt) *Principal: the amount borrowed *Interest: the price paid for the use of another’s money Borrowing money from banks. Limited liability Unlimited life (Longevity) Ease of transferring ownership:. Buying and selling stock is easy and is done millions of times a day

Corporations Income is taxed. Disadvantages of a corporation: Expensive to start up. Stockholders (owners) have a limited role Profits are taxed (double taxed) Corporations are subject to more government regulations than sole proprietors or partners Income is taxed. Stockholders pay taxes on profits issued to them

Finding The right business Structure

How do Corporations differ from Partnerships and Sole Proprietorships? Lets Assess… How do Corporations differ from Partnerships and Sole Proprietorships? Ownership? Access to Capital & Credit? Decision Making?

Let’s Assess Complete “SWEET OPPORTUNITIES” Activity Make recommendation of business type Tell why you chose that business type for that client. Identify the negative (disadvantage) that the client will encounter based on the information. Suggest how the client might minimize the disadvantage USE NOTES TO COMPLETE

Other Types of business Organizations

How to become a rich man from nothing Warren Buffett

Franchise Franchise a contractual agreement to use the name and sell the products or services of a company in a designated geographic area To run a franchise, you have to invest money and pay franchise fees or a share of the profits.

a company operating in several countries. multinational a company operating in several countries.

Non-Profits: We don’t like $$$ we just want to make you

NON PROFITS a type of business that focuses on providing a service, not making a profit A nonprofit organization does not pay taxes because it does not make a profit.

Red Cross Controversy http://www.fox26houston.com/news/the-isiah-factor/flood-victims-mad-after-being-denied-400-from-red-cross

Cooperatives A farm, business, or other organization that is owned and run jointly by its members, who share the profits or benefits. There are more than 29,000 cooperatives in the U.S. You may not realize that many household names in the business world are co-ops:

Mergers and Acquisitions a combination of two things, especially companies, into one. 5 Reasons to merge Make money faster, Increase efficiency, Acquire new product lines, Catch up to or eliminate rivals, Lose a company identity.  

Mergers and Acquisitions a combination of two things, especially companies, into one.

Mergers and Acquisitions   Horizontal Merger- when two or more companies that product the same kind of product join forces. Vertical merger- when two or more firms that are at different steps of manufacturing process join together. Conglomerate merger –

Conglomerate is a firm that has at least four businesses, each making unrelated products. Overall, Nestlé owns over 8,500 brands in over 80 countries

Bankruptcy a legal status of a person or other entity that cannot repay debts to creditors. A debt is also is also known as a liability

Bankruptcy Filing bankruptcy can help a person by discarding debt or making a plan to repay debts. A bankruptcy case normally begins when the debtor files a petition with the bankruptcy court.    All bankruptcy cases are handled in federal courts under rules outlined in the U.S. Bankruptcy Code.

Bankruptcy a combination of two things, especially companies, into one.

Let’s Assess Complete WS

Starting a Business Complete Business Plan Activity https://www.thebalance.com/starting-a-small-business-4073888

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