Business Organizations Ch. 8

Overview Section 1: Sole Proprietorships Section 2: Partnerships Section 3: Corporations, Mergers, & Multinationals Section 4: Other Organizations

Sole Proprietorships Sec. 1 Key Vocabulary Objectives: Business organization Describe characteristics of a Sole Proprietorship Sole proprietorships Analyze advantages & disadvantages of a Sole Proprietorship Business license Zoning law Liability Fringe benefits

Characteristic of a Sole Proprietorship Business owned & managed by a single individual That’s it…just one owner, thus the word “sole” Nifty facts to know: Most entrepreneurs started out as sole proprietors 75% of businesses in US Only 6% of all US sales

Sole Proprietorship Advantages: Disadvantages: Easy to setup Few regulations Owner gets the profits after taxes Owner has full control Easy to discontinue Disadvantages: Unlimited Personal Responsibility Limited access to resources Lack of permanence

Section 2: Partnerships Key Vocabulary Partnership General partnership Limited partnership Limited liability partnership (LLP) Articles of partnership assets Objectives: Describe characteristics of the three main types of partnerships Analyze advantages & disadvantages of a partnership

Characteristics of a Partnership Business organization owned by two or more persons All agree on specific division of responsibilities and profits Three types: General Limited Limited liability Nifty facts to know: About 7% of all businesses in US 5% of all sales 10% of all income earned in US in a year

Partnerships Advantages: Disadvantages: Ease of setup Few regulations Shared decision making and specialization Larger pool of capital No special taxes Disadvantages: Unlimited liability unless you’re an LLP Potential for Conflict b/t partners

Section 3: Corporations, Mergers, & Multinationals Key Vocabulary Corporation Stock Closely held corporations Publicly held corporations Certificate of incorporation Dividend Horizontal merger Vertical merger Conglomerate Multinational corporation Objectives: Describe characteristics of a corporation Analyze advantages & disadvantages of incorporating Compare & contrast types of corporate combinations Describe role of multinational corporations

Characteristics of a Corporation Legal entity, or being, owned by individual stockholders (or shareholders) Like an individual, a corporation pays taxes can engage in business can make contracts can sue and be sued Types of Corporations Closely held: examples are Mars Candy, Rolex, LEGO, IKEA Publicly held Nifty facts to know: 20% of all businesses in US 90% of all sales 70% of all income earned

Typical Corporate Structure Owners: people who buy stock Board of Directors: elected by stockholders Corporate Officers: appointed by Board Managers: hired by Corporate officers Employees: hired by managers

To incorporate or not to incorporate Advantages of incorporating Limited liability Transferable ownership Ability to attract capital Owners don’t need special skills, just money Long life Disadvantages of incorporating Expensive & difficult to start up Double taxation Loss of control More regulations

Mergers Types of Mergers Sometimes companies want to joint together or one wants to buy a competing company. Sometimes a company buys another company just to make more money. Types of Mergers Horizontal Not many examples today b/c gov’ts fear monopolies Vertical Examples: American Apparel, ExxonMobil, Apple Conglomerate Examples: Boeing, Comcast, Dow Chemical, Procter & Gamble, Time Warner, Trump Organization, Viacom

A word about Multinationals Companies that operate in more than one country Typically the largest corporations Why would a corporation want to operate in more than one country? Are there any disadvantages to operating in more than one country?

A few famous multinationals, to name a few Activision Blizzard Johnson & Johnson AMD Krispy Kreme Apple L’Oreal Aeropostale McDonald’s Baskin-Robbins Mattel Bic Michelin Billabong Microsoft Black & Decker Motorola Boeing Nestle Bridgestone Nike Capital One PepsiCo Caterpillar Red Bull Coca-Cola Samsung Costco Sony Dell Southwest Airlines Dunkin’ Donuts Starbucks Facebook Toyota Ford Wal-Mart Google