5 BUSINESS ORGANIZATION 5-1 Business in the U.S. Economy C H A P T E R 5 BUSINESS ORGANIZATION 5-1 Business in the U.S. Economy 5-2 Forms of Business Ownership 5-3 Organizational Structure for Businesses

Contingent worker- employee with no long term obligation (short term or temporary worker) PERCENT OF BUSINESSES BY EMPLOYEE SIZE

BUSINESS ACTIVITIES Generating ideas Raising capital Employing and training personnel Buying goods and services Marketing goods and services Maintaining business records

TYPES OF BUSINESSES Producer- Create products and services Example: Extractor, Farmer, manufacturers Intermediaries- Selling goods & services Example: Retail clothing store, COSTCO Service business- Offer something intangible Example: Dentist, Teacher

3 TYPES OF BUSINESS OWNERSHIP Sole Proprietorship- 1 owner Example: Duncan’s Landscape (small business) Partnership- 2 or more owners Example: Law office of Smith & Williams Corporation- A legal entity where the owners are shareholders (stock ownership) Example: Apple, Wal-Mart

3 TYPES OF BUSINESS OWNERSHIP Sole Proprietorship- Unlimited Liability- Owner is 100% responsible for the business Partnership- Partnership Agreement- Legal Document that defines the details of each partner Corporation- Articles of Incorporation- Legal documents that defines the details of the corporation. Stock- shares of ownership in a corporation Limited Liability- The risk is limited to your investment.

Forms of Ownership U.S. Business Comparison by Form of Ownership Number of Businesses (2006) Total Revenue (Thousands) Percent of All Businesses Percent of Total Revenue Proprietorship 22,075,000 1,278,000,000 71.53% 4.06% Corporation 5,841,000 26,070,000,000 18.93% 82.82% Partnership 2,947,000 4,131,000,000 9.55% 13.12% Total 30,863,000 31,479,000,000 100.00%

Checkpoint  Which form of business ownership is the most complex and difficult to form? The corporation is more complex to begin than other business forms. Forming a corporation requires much more bureaucracy, is more subject to government regulations, requires the organization of a board, and must have clearly defined bylaws.

OTHER FORMS OF OWNERSHIP Franchise- a chain business that you can purchase for a fee. Any 3 of the ownerships can invest in a franchise EXAMPLE: McDonalds, Sport Clips,

Checkpoint  What are the other specialized forms of business ownership? Limited liability partnership Joint venture S corporation Limited liability company (LLC) Nonprofit corporation

KEY TERMS Mission Statement- a written objective of the company’s goals and vision Goal- the objective, what are you wanting to accomplish Policies- rules of the business Procedures- methods of activities that support the mission statement and goals. Organization chart- chain of command chart, who is in charge of who and what

BUSINESS ORGANIZATION CHART

(3 types of ownership, advantages/ disadvantages/legal documents) Sole Proprietorship Advantage- 100% profit, easy to start Disadvantage- 100% liability & risk, long hours Legal Docs: Assumed Name Certificate, SS# or Tax ID Partnership Advantage- shared responsibility and risk Disadvantage- shared profits Legal Docs: Partnership Agreement, Tax ID Corporation- Advantage – limited liability, more resources Disadvantage- double taxation, limited profits Legal Docs: Corporate Resolution, Articles of Incorporation, Tax ID

Page 2A & 2B (ONLINE RESEARCH) FRANCHISE RESEARCH (2) www.entrepreneur.com/franchise CORPORATION RESEARCH