Business Organizations Chapter Eight: Business Organizations

Section One: Sole Proprietorship

Types of Business Organizations

Sole Proprietorship A Sole Proprietorship is a business owned and operated by one person.

Name one company that is an example of a sole proprietorship

Advantages of Sole Proprietorship Easy Start-Up- Cost and Legal Considerations Are Small Full Control- One Person Is Responsible For The Business Exclusive Right To Profit- The Profits Go To The Business Owner Relatively Few Regulations – Sole proprietorships are the least regulated form of business organization

Disadvantages of Sole Proprietorship Unlimited Liability- Owner Is Financially and Legally Responsible For The Business. Limited Growth Potential- One Owner May Not Be Able To Raise Enough Money To Grow The Business Lack Of Longevity- Relying On One Person Limits The Ability Of A Business To Overcome Hardships.

Section Two: Partnerships

Partnerships Partnerships- A Business That Includes More Than One Persons That Share Equal Decision Making Authority.

Advantages of Partnerships Ease Of Start-Up- Costs and Few Government Regulations Are Involved In Partnerships Specialization- Each Partner Will Bring His/Her Own Unique Talents Shared Business Losses- The Business Will Be Able To Face Adversity Better Than Sole A Proprietorship.

Disadvantages of Partnerships Unlimited Liability- If One Partner Does Not Fill Responsibilities Then The Other Partners Will Have To Pick Up The Slack. Lack Of Longevity- If One Partner Drops Out Then The Other Partners Will Have To Struggle For Survival Potential for Conflict

I want Pizza!!! I want Chinese!!!

The Three Types of Partnership General Partnership Limited Partnership Limited Liability Partnership

General Partnership All partners share equally in both responsibility and liability.

Limited Partnership Only one partner is required to be a general partner

Limited Liability Partnerships (LLP) All partners are limited partners

Corporations, Mergers, and Multinationals Section Three: Corporations, Mergers, and Multinationals

Corporations Corporations Are Legally Distinct From Their Owners Corporations May Own Property, Hire Workers, Make Contracts, Pay Taxes, Make and Sell Products, Sue and Be Sued.

Total Profit Made In America

How do Corporations make 70% of Profit???

Closely Held Corporations Publicly Held Corporations Types of Corporations Closely Held Corporations Publicly Held Corporations Held by a few people such as family members. The stock is very rarely traded. Also known as a privately held corporation. Has many shareholders who can buy and sell their stock on the open market. Usually larger corporations.

Advantages of Corporations Benefits For Stockholders: If A Company Fails- The Loss To Stockholders Is Limited To The Amount They Invested Stockholders May Take Back Part or all Of Their Investment By Selling Stock

Advantages of Corporations Limited Liability For Corporation’s Founders- The Corporation Assumes Financial and Legal Responsibilities. Management- Departments Are Formed To Efficiently Handle The Problems Of Running A Business Easy To Raise Capital- Adding Share Holders Will Generate Revenue That Will Help The Business Grow

Disadvantages of Corporations Strong Government Regulation- Business Practices Are Closely Watched By The Government. Taxes- Corporations Pay A Higher Tax On The Profit They Earn. Slow Decision Making Process- The Amount Of People Involved Makes Decision Making A Slow Process

Disadvantages of Corporations Stockholders Are Removed From The Daily Operations Of The Business and Have Little Control. (This May Be Both Good and Bad)

Corporate Combinations Horizontal Mergers – Two or more companies that compete in the same market Ex. Diamler- Chrysler

Corporate Combinations Vertical Mergers – Joins two or more companies involved in different stages of production of one good or service.

Corporate Combinations Conglomerate – Joins together three or more firms that produce unrelated products

Multination Corporations Large corporations that produce and sell its goods throughout the world Benefit consumers and workers by providing jobs and products around the world

Section Four: Other Organizations

Other Organizations Cooperatives- A Business Owned Collectively By A Group Of People Example: An Apartment Complex Nonprofit Organization- Provides Goods and Services Without The Expectation Of Earning A Profit

Business Franchise Franchise- A Business That Allows The Original Name Of A Company To Be Used For Marketing Purposes

Structure of Corporations Stocks- Represent Ownership Of The Corporation Share- Ownership Of Stock

Structure of Corporations Preferred Stock- No Voice In Decision Making. However, Guaranteed Dividends Before Any Common Stock Holder Is Paid. Common Stock- Provides Shareholders a Voice The Daily Operations Of A Company

Bonds A Certificate Issued By A Corporation In Exchange For Money Borrowed From An Investor $10,000 Maturity- 10 Years Rate Of Return-3% Principle Interest