C HAPTER 8 – B USINESS O RGANIZATIONS

S OLE P ROPRIETORSHIPS Sole Prop – business owned and operated by one person. Examples: Jammer’s Lawn Care, Richtermeier Quarter Horses, Steve’s Painting. Facts: The most basic type of business organization The oldest type of business organization 23.1 million sole prop’s in US in 2009, earning $280 billion for that year.

S OLE P ROPRIETORSHIPS C ONT … Advantages: Keep all profits Set your own schedule Usually pretty low Can be very satisfying Can be very rewarding Disadvantages: All your losses Unlimited Liabilty Have to make all decisions Can also be very frustrating, stressful Can be hard to get banks to loan large amounts of money. Profits/losses Liability Management Taxes Personal Satisfaction Financing Growth

P ARTNERSHIPS Partnership – business that is owner by two or more people. Examples: Many doctor’s offices, dentists, chiropractors etc. Special forms of partnerships: Limited Partnerships – one or more of the partners have limited liability but no voice in management. Joint Ventures – temporary partnership setup for a specific purpose. Ex. Real estate investments such as flipping houses.

P ARTNERSHIPS C ONT … Advantages Losses are shared More efficient then a sole prop Share responsibilities Taxes are usually low Have pride in successes Combine funds Disadvantages Profits are shared Liability is unlimited but divided among partners Have to agree on decisions Can be stressful owing a business, can ruin relationships Have trouble getting large loans Profits/losses Liability Management Taxes Personal Satisfaction Financing Growth

C ORPORATIONS corporation – type of business owned by many people but treated by law as if it is it’s own person. Examples: McDonald’s, Nike, Dell, GM, any companies you own on the stock game, etc. Misc: Treated as a entity, so double taxed. Articles of incorporation – document filed with the state listing basic info about a corporation that is being started. Corporate charter – a license to operate a corporation granted by the state where it is established. ***Look at Figure 8.5 on page 221***

C ORPORATIONS C ONT … Advantages Very little time involved for stockholders to earn money Limited liability-only liable for what you invested Divided up tasks to specialized managers Easy to attain simply by owing a share of stock Easy to do by selling more stock Disadvantages Have to share profits Decisions can take forever Double taxed Little say in the day to day operations Profits/losses Liability Management Taxes Personal Satisfaction Financing Growth

S ELLING S TOCK Common Stock – gives investor part ownership of company, a right to future profits, voting rights at the annual stockholder’s meeting. Preferred stock – no voting rights in a corporation, but are guaranteed certain amt of dividends each year. Dividend – part of a corporation profits that is divided up and paid to its stockholders. Board of Directors – group of people who make big decisions for corporations, things like goals and future projects. Elected by stockholders at the annual meetings.

F RANCHISES Franchise – contract where the franchiser sells the right to use its name and sell its products to other businesses. The person who buys it is called a franchisee. They pay an up front fee as well as a percentage of all future profits. In return, the franchise will help set up the business, they will also do training of its employees. They will also do marketing which will create business for them.

W ANT TO START YOUR OWN FRANCHISE ? Get on the internet and look up how much it costs to buy a franchise? Look up 5 of your favorite franchises. We will discuss what you find as a class.