Businesses and Organizations

BUSINESS ORGANIZATIONS Standard: SSEMI4: The student will compare and contrast three forms of business organization—sole proprietorship, partnership, and corporation.

TABLE DISCUSSION Discuss a business you would like to start. What type of products will you have? What kinds of barriers could you encounter? Who are your customers? What does that organization look like? How much competition will you have? What would make your business unique?

Barriers to Entry Barriers to entry—factors that make it difficult for new firms to enter the market. Common barriers include… Start-up costs—expenses a business must pay before the first product reaches a consumer....and… Technology—some markets require a high degree of tech. know-how.

Economies of Scale Economies of scale—factors that cause a producer’s average cost per unit to fall as its output rises. Think about shoes… (you don’t need to write this down unless it helps you) Mass-produced sneakers can be purchased for less than $10.00… Hand-made Italian shoes can cost thousands… One reason for the cost difference is the scale (how big or small) of the production.

Sole Proprietorship A business owned and operated by one person. It is the oldest, simplest, and most common type of business organization. Advantages: 1. easy start-up 2. full control 3. exclusive rights to profits. Disadvantages: 1. unlimited liability 2. sole responsibility 3. limited growth potential 4. lack of longevity.

Entrepreneurs Entrepreneurs can also be sole proprietors Profit is a major incentive for entrepreneurs to go into business.

Partnership A business owned and controlled by two or more people. They’re most often seen in professional fields… accounting firms, doctors’ and lawyers’ offices. Advantages— 1. easy start-up; 2. specialization (different duties); 3. shared decision making; 4. shared losses. Disadvantages— 1. unlimited liability; 2. potential for conflict; 3. lack of longevity.

Corporations A business in which a group of owners, called stockholders, share in the profits and losses. Advantages— 1. limited liability; 2. management is separate from ownership; 3. easy to raise money; 4. longevity. Disadvantages— 1. heavily regulated by the government; 2. slow decision making; 3. double taxation (profits and dividends).

Other Types of Organizations Franchises—businesses that are owned separately but have the same name. Example—McDonald’s. Cooperative (co-op)—owned collectively by members. Non-profit organization—a business with goals other than profits. Example—the Red Cross

Your Assignment EACH of you will create a brochure/booklet outlining the types of business organizations. Directions Take a piece of paper, and fold it in half – ‘hamburger style’ You will have a cover, and three pages, each page will be dedicated to a type of business organization Each business organization must include the following information: Definition Advantages Disadvantages 3 examples of a real business that uses that form of organization. I have markers, colored pencils, colored and white paper available for you to use.