Businesses and Organizations

Standards SSEMI4a: The student will explain the organization and role of business. SSEMI4a: The student will compare and contrast three forms of business organization—sole proprietorship, partnership, and corporation.

Barriers to Entry Obstacles for new firms to enter market. Start-up costs—upfront expenses Usually before 1st product reaches consumers Technology—Required by some markets Include know-how/ actual tech

Economies of Scale Economies of scale—When avg. cost/unit ⬇ as output ⬆ i.e. shoes Mass-produced = purchased < $20.00 Hand-made Italian shoes = cost $1,000s… difference = the scale of production.

Sole Proprietorship business owned/operated by one person. Oldest, simplest, most common type of B.O.

Sole Proprietorship Advantages easiest to start-up full control exclusive rights to profits.

Sole Proprietorship Disadvantages unlimited liability and sole responsibility limited growth potential lack of longevity.

Partnership Two or more ppl own and control Usually seen in professional fields Accountants Doctor’s offices Lawyer’s firms

Partnership Advantages— easy start-up; specialization (different duties); shared decision making shared losses.

Partnership Disadvantages— unlimited liability; potential for conflict; lack of longevity.

Corporations A business owned by stockholders Stockholders a group of owners share in the profits and losses.

Corporations Advantages— limited liability; management separate from ownership easy to raise money longevity.

Corporations Disadvantages heavily regulated by government slow decision making double taxation (profits and dividends).

Other Types of Organizations Franchises— Owned separate from cooperate Pay a fee to use the name i.e.—McDonald’s. Cooperative (co-op)— owned collectively by members. Non-profit organization— goals ≠ profits i.e.—the Red Cross