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Read to Learn Describe the advantages and disadvantages of the three major forms of business organizations. Describe how cooperatives and nonprofits are like and unlike corporations and franchises.

The Main Idea Sole proprietorships, partnerships, and corporations are the most common forms of business organization. Cooperatives, nonprofits, and franchises are other forms.

Key Concepts Organizing a Business Other Ways to Organize a Business

The three main types of business organizations are: Organizing a Business The three main types of business organizations are: Sole Proprietorships Partnerships Corporations

U.S. Sole Proprietorships, Partnerships, and Corporations Figure 6.1 U.S. Sole Proprietorships, Partnerships, and Corporations

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

Graphic Organizer Advantages of Sole Proprietorships Easy to start Proprietors are in charge Proprietors keep all the profits Taxes are lower than a corporation’s

Sole Proprietorships A major disadvantage of owning a sole proprietorship is that the owner has unlimited liability. unlimited liability when the owner is responsible for the company’s debts

Graphic Organizer Disadvantages of Sole Proprietorships Limited access to credit Many run out of money The owner may not have the necessary skills The business ends when the owner dies

To start a partnership, you need a partnership agreement. Partnerships To start a partnership, you need a partnership agreement. partnership a business owned by two or more people who share its risks and rewards

Graphic Organizer Advantages of Partnerships Easy to start Easier to obtain capital Easier to obtain credit Not dependent on a sole person Only taxed once Diversity in skills

Graphic Organizer Disadvantages of Partnerships Business risk is shared Unlimited legal and financial liability is shared If one partner makes a mistake, all partners are responsible

Corporations To form a corporation, the owners must get a corporate charter from the state where their main office will be located. corporation a company that is registered by a state and operates apart from its owners

Limited liability is a major advantage of a corporation. Corporations Limited liability is a major advantage of a corporation. limited liability holds a firm’s owners responsible for no more than the capital that they have invested in it

Graphic Organizer Advantages of Corporation Limited liability Ability to raise money by selling stock Business does not end when an owner dies

Graphic Organizer Disadvantages of Corporation Double taxation More government regulation Difficult and costly to start Income is taxed. Stockholders pay taxes on profits issued to them

Other Ways to Organize a Business Other ways to organize a business include: Cooperative Nonprofit Organization Franchise

Other Ways to Organize a Business The purpose of a cooperative is to save money on the purchase of certain goods and services. cooperative an organization that is owned and operated by its members

Other Ways to Organize a Business A nonprofit organization does not pay taxes because it does not make a profit. nonprofit organization a type of business that focuses on providing a service, not making a profit

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

Car Sharing Car sharing is a popular European process in which many households share vehicles. Mobility CarSharing cooperative in Switzerland has over 50,000 clients.

What is the difference between a sole proprietorship and a partnership? A sole proprietorship is owned by one person. A partnership is owned by two or more people.

If a partner makes a bad decision, what responsibility do the other partners have? All partners share responsibility for a bad decision.

Why are cooperatives formed? so that the members have advantages in buying and selling products and services

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Read to Learn Differentiate the six types of businesses. Describe the five functions of business. Discuss how the five functions of business relate to each other.

The Main Idea There are many different types of businesses. The five functions of business are involved in every one.

Key Concepts Types of Businesses Functions of Business How the Functions of Business Are Interdependent

Functions of Businesses Graphic Organizer Types of Businesses Functions of Businesses Producers Processors Manufactures Intermediaries and Wholesalers Retailers and Service Businesses Production and Procurement Marketing Management Finance and Accounting

Producers A producer may be found in industries such as agriculture, mining, fishing, or forestry. producer a business that gathers raw goods

A processor may, for example, turn crude oil into gasoline. a business that changes raw materials into more finished products

Manufacturers Cars, CDs, and computers are examples of goods that are made by a manufacturer. manufacturer a business that makes finished products out of processed goods

Intermediaries and Wholesalers An intermediary buys goods, stores them, and then resells them. intermediary a business that moves goods from one business to another

Intermediaries and Wholesalers A wholesaler of clothing may buy thousands of jackets from several manufacturers, divide the large quantities into smaller ones, and sell them to retailers. wholesaler a business that moves good from one business to another

Retailers and Service Businesses A record store is an example of a retailer. retailer a business that purchases goods from a wholesaler and sells them to consumers, the final buyers of the goods

Retailers and Service Businesses Service businesses perform tasks rather than provide goods. Service businesses employ about three- quarters of the workforce and are rapidly increasing in numbers.

Functions of Business The five main functions of business are: Production and procurement Marketing Management Finance Accounting

Production and Procurement Production and procurement are closely related functions of business. production the process of creating, expanding, manufacturing, or improving goods and services procurement the buying and reselling of goods and services that have already been produced

Marketing involves getting consumers to buy a product or service. the process of planning, pricing, promoting, selling, and distributing ideas, goods, and services

To Advertise or Not Advertising is used to influence consumers to buy one product or service over another.

Management is an important function of business. the process of achieving company goals by planning, organizing, directing, controlling, and evaluating the effective use of resources

Finance and Accounting Finance requires analyzing financial statements to make future decisions. finance the business or art of money management

Finance and Accounting Accounting requires attention to detail and accuracy. accounting maintaining and checking records, handling bills, and preparing financial reports for a business

How the Functions of Business Are Interdependent The functional areas of a business depend on each other. Sometimes, the functional areas of a business conflict with each other.

Example of How Functional Areas Depend on Each Other Graphic Organizer Example of How Functional Areas Depend on Each Other A furniture maker’s sales are decreasing. The accounting and finance department notice decreasing sales. If the furniture is too highly priced, more efficient procedures will have to be implemented. A new marketing plan is created. The accounting and finance department will monitor the effects of new marketing efforts.

Example of How Functional Areas Conflict with Each Other Graphic Organizer Example of How Functional Areas Conflict with Each Other Management wants to increase sales by 20 percent within three years. The production department suggests improving quality. The marketing department requests more funds for projects. Accounting says there is not enough money for either plan. The final plan involves ideas from all the functions of business.

What is the difference between a producer and a processor? A producer gathers or creates raw products. A processor changes raw products into more finished products.

Identify the five functions of business. production and procurement, marketing, management, finance, and accounting

Give an example of how the accounting and finance functions can affect a business’s marketing and production processes. If the financials show little profits, new marketing plans may be developed and new production procedures may be implemented.

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