Chapter 8: Business Organizations

Section 1: Starting a Business Profit Motive Getting Started – Entrepreneur, some one willing to take a risk. – Gather relevant factors of production. – Research Competition Demography What else?

Getting Started Help from the government – Startups- new small business – Small business incubator – Economic Enterprise zones – Department of Commerce – Help from the internet

Elements of Business Operation Expenses – Start up – Inventory – Monthly Advertising Record Keeping – Receipts Risk

Section 2: Sole Proprietorships and Partnerships Sole Proprietorship, most common type of business. Proprietor, owner. Profits and losses are all yours. Unlimited liability, assets may be seized All management is on you. Pay taxes as personal income, saves money.

Sole Proprietorship Personal satisfaction in a job well done. Demands on time. Easier to get credit. Borrowing large amounts can be tough. Life of the business is limited.

Partnership Two or more owners. Limited Partnership, Partners are not equal. – General Partner- run day to day affairs – Limited Partner(s) Shared profits

Continued More efficient, two heads are better than one but can lead to disagreements. Tax advantage Combines capital. Business lasts longer, can buy one out. Limited liability Joint Venture- Temporary

Section 3: The Corporate World and Franchises Time to expand -corporation : is an organization owned by many people by treated by the law as though it were a person. Stocks: a share of ownership in a corporation, entitles buyer to part of future assets of the company.

Limited liability: requirement in which an owners responsibility is for a companies debts is limited to the size of the owners investments in the firm.

Articles of incorporation Articles of incorporation: – Name, address, and purpose of corporation – Name, address of initial board members and directors – Number and shares of stocks to be issued – Amount of money capital to be raised through issuing stock.

Corporate charter: a license to operate from that state. Common stock: Shares of ownership that give stock holders voting rights and a portion of future profits.(after holders of preferred stocks are paid)

Dividend: portion of profit paid to stock holders. Preferred stocks: NO VOTING in company, but guaranteed a certain amount of dividend each year. By Laws: a set of rules describing how stock will be sold and dividends paid.

Franchise: is a contract in which a firm sells to a group of people to use its name and sell its product.