Chapter 8: Business Organizations Section 3 E.Q What are the characteristics and downfalls of incorporation?

Introduction What are the risks and benefits of corporations? Corporations provide the opportunity for stockholders to own part of a company and reap the benefits of that company’s success. Corporations provide flexibility for their stockholders. E.Q What are the characteristics and downfalls of incorporation?

Introduction What are the risks and benefits of corporations? Corporations provide the opportunity for stockholders to own part of a company and reap the benefits of that company’s success. Corporations provide flexibility for their stockholders. On the other hand, corporations are difficult and expensive to start and must pay double taxes. Also, the original owners can lose control over their company, since decisions are made by corporate officers on board of directors. E.Q What are the characteristics and downfalls of incorporation?

Corporations The most complex form of business organization is the corporation. Individual stockholders own stock in a corporation and are, therefore, part-owner of the company that issues the stock. In the United States, corporations account for about 20 percent of all businesses but more than 80 percent of all sales. E.Q What are the characteristics and downfalls of incorporation?

Types of Corporations Closely held corporations Corporations that issue stock to only a few people, often family members. Publicly held corporations Corporations that sell stock on the open market. Owners of a corporation elect a board of directors that makes all the major decisions. E.Q What are the characteristics and downfalls of incorporation?

Characteristics of Corporations E.Q What are the characteristics and downfalls of incorporation?

Advantages Incorporation, or forming a corporation, offers advantages to stockholders and the company itself. Advantages for stockholders: limited liability Flexibility with easily transferable stock E.Q What are the characteristics and downfalls of incorporation?

Advantages, cont. Advantages for the company: More potential for growth and longevity Ability to raise money by borrowing No need for special managerial skills Corporations have a self-interest in developing profitable products and services. For example, consumer concern about global warming has led many corporations to develop eco-friendly technology. E.Q What are the characteristics and downfalls of incorporation?

Disadvantages Checkpoint: What are the disadvantages of incorporation? Difficulty and expense of start-up Corporate charters can be difficult, expensive, and time consuming to create. Double taxation Corporations must pay corporate income taxes as well as taxes on the dividends paid to stockholders Loss of control Owners do not manage the activities of a corporation More regulation Checkpoint Answer: Difficulty and expense of start-up, double taxation, loss of control, and more regulation. E.Q What are the characteristics and downfalls of incorporation?

Corporate Combinations Corporations can grow larger by merging with another corporation. There are three types of mergers: Horizontal mergers are the combination of two or more firms competing in the same market with the same good or service, such as the merger between Cingular and AT&T in 2004. Vertical mergers join two or more firms involved in different stages of producing the same good or service. Conglomerates occur when three or more businesses that produce unrelated products or services merge. E.Q What are the characteristics and downfalls of incorporation?

Horizontal and Vertical Mergers E.Q What are the characteristics and downfalls of incorporation?

Multinational Corporations Multinational corporations are the world’s largest corporations and they sell their goods and services in more than one country. Advantages Benefit consumers by producing jobs and products around the world. Help poorer countries enjoy better living standards Spread new technology across the globe E.Q What are the characteristics and downfalls of incorporation?

Disadvantages of MNCs Disadvantages Unduly influence culture and politics in countries in which they operate. Jobs in poorer countries are often marked by low wages and poor working conditions. E.Q What are the characteristics and downfalls of incorporation?

Chapter 8: Business Organizations Section 4

Essential Question: Identify the different types of cooperative organizations.

Key Terms cooperative: a business organization owned and operated by a group of individuals for their shared benefit consumer cooperative: a retail outlet owned and operated by consumers that sells merchandise to members at reduced rates service cooperative: a type of cooperative that provides a service rather than a good producer cooperative: an agricultural marketing cooperative that helps members sell their products Essential Question: Identify the different types of cooperative organizations.

Key Terms, cont. nonprofit organization: an institution that functions much like a business, but does not operate for the purpose of making a profit professional organization: a nonprofit organization that works to improve the image, working conditions, and skill levels of people in particular occupations business association: a group organized to promote the collective business interests of an area or group of similar business interests trade association: nonprofit organizations that promote the interests of particular industries Essential Question: Identify the different types of cooperative organizations.

Introduction How are some businesses organized to help others? Cooperatives are businesses created by a group of individuals who share benefits. Nonprofit organizations are run like a business but their goal is not to make a profit. Instead these organizations seek to benefit the public in some way. Essential Question: Identify the different types of cooperative organizations.

Cooperatives A cooperative is a type of business organization owned and operated by a group of individuals for their shared benefit. First instituted by Benjamin Franklin, cooperatives are based on the following principles: Voluntary and open membership Control of the organization by its members Sharing of contributions and benefits by members Essential Question: Identify the different types of cooperative organizations.

Cooperatives, cont. Cooperatives do not have to pay income taxes because they are not corporations. Cooperatives are found in many industries including farming and health care. Essential Question: Identify the different types of cooperative organizations.

Consumer Cooperatives There are three kinds of cooperatives. Consumer cooperatives are retail outlets owned and operated by consumers. They sell merchandise to members at reduced prices. Examples of consumer cooperatives include discount price clubs and housing co-ops. Some co-ops require members to work a small number of hours to maintain membership. Essential Question: Identify the different types of cooperative organizations.

Service and Producer Cooperatives Service cooperatives are co-ops that provide a service. Some service co-ops offer discounted insurance, health care, or legal help. Credit unions are an example of a service co-op. Producer cooperatives are agricultural marketing co-ops that help members sell their products. Members focus their attention on their crops or livestock while the co-op markets the goods for the highest possible price. Essential Question: Identify the different types of cooperative organizations.

Nonprofits Nonprofit organizations function like a business but do not operate for the purpose of generating profit. Examples of nonprofits include museums, public schools, the American Red Cross, hospitals, churches, and many other groups and charities. Nonprofits, like co-ops, are exempt from paying income taxes, but the nonprofit must meet certain requirements to qualify for tax-exempt status. Nonprofits have limits on their political activity. Essential Question: Identify the different types of cooperative organizations.

Professional Organizations Some nonprofits provide support to particular occupations or geographical areas. Professional organizations work to improve the image, working conditions, and skill levels of people in particular occupations such as the National Education Association for educators. Keep members up-to-date on industry trends. Set codes of conduct that members must follow. Essential Question: Identify the different types of cooperative organizations.

Business Associations Promote the collective business interests of a city, state, or other geographical area. The Better Business Bureau (BBB), which aims to protect consumers by promoting an ethical and fair marketplace is an example of a business association. Essential Question: Identify the different types of cooperative organizations.

Trade Associations Trade associations promote the interests of particular industries. Many trade associations hire lobbyists to work with state legislatures and Congress to try to influence laws that affect an industry. Essential Question: Identify the different types of cooperative organizations.

Review Now that you have learned how some businesses are organized to help others, go back and answer the Chapter Essential Question. Identify the different types of cooperative organizations.