Sole Proprietorships A business that is owned and managed by a single person. The most common type of business in the US. (70% of American businesses) Sole Proprietorships generate less than 5% of all sales in American business.
Sole Proprietorships Advantages: - Relatively easy to open or close. - There are few regulations. - Owners have freedom and near total control of their business - Owners keep all the profits.
Sole Proprietorships Disadvantages: - Limited funding: startup cost fall completely on the owner. - Limited Life- the business ceases to exist if the owner leaves, dies or retires. - Unlimited Liability- owners are totally responsible for all losses, debts and claims against the business.
Sole Proprietorships Examples: - Edmonson’s Barber Shop on hwy 31 - Wayne’s Produce - Lovett Woodworking
Partnerships A business that is co-owned by two or more people. Partners are often responsible for different aspects of the business. There are three different types of Partnerships.
Partnerships Type 1: General Partnerships - Where partners share responsibility for managing the business and each partner is liable for all debts and losses.
Partnerships Type 2: Limited Partnerships - When at least one partner is not involved in the day-to-day running of the business and is only responsible for the money they have invested. - This person is basically an investor.
Partnerships Type 3: Limited Liability Partnership - Where partners are limited partners and not responsible for the debts and liabilities of the other partners.
Partnerships Advantages: - Easy to open and close - Few regulations - Access to the resources of the other partners
Partnerships Disadvantages: - Unlimited liability (most partnerships) - Potential for conflict - Limited life
Corporations - A business owned by individuals (shareholders) that own the rights to the company’s profits, but face limited liability of the company’s debts and losses. - Shareholders acquire ownership through the purchase of stock; shares of the corporation.
Corporations As a stockholder your only risk is the amount of money that you have invested in the company, not for any debts that the company may have acquired. Some stocks pay dividends or parts of the profits given directly to the share holder.
Corporations A public company allows anyone to buy their stock, while a private company retains control over who can buy or sell the stock.
Corporations Advantages: - Access to resources - Professional management - Limited liability - Unlimited life (business will continue regardless of who enters and leaves)
Corporations Disadvantages: - High start-up cost - Heavily regulated by the government - Double taxation (yikes!) - Potential loss of control
Other Good Stuff Horizontal Merger: - The joining of companies that offer the same or similar goods or services. Vertical Merger: - Companies that combine who offer several different steps of production of a product or service. * More on next Slide
Horizontal vs. Vertical Horizontal Example: - Standard Oil/ John Rockefeller Vertical Example: - Carnegie Steel/ Andrew Carnegie
More Good Stuff A conglomerate is a merger of companies that produce unrelated products or services. Examples: - Colgate-Palmolive Company - AT&T bought out Direct TV. Through growth, an enterprise can become a multinational corporation which means it have several branches in several different countries. Examples: - McDonalds - Wal-Mart
Classroom Activity Yay! Listen to Mr. Lovett while he explains what you will be doing in class for the next two days. Hey, that’s me! >
Resources Meek, Morton and Shug, M. (2011). Economics: Concepts and Choices. Orlando, Florida: Holt McDougal. b jpg b jpg DR7t3dWRJrQ/UcoQo2olbNI/AAAAAAAAAHo/LGu3rHLbDPw/s1600/business-law.png DR7t3dWRJrQ/UcoQo2olbNI/AAAAAAAAAHo/LGu3rHLbDPw/s1600/business-law.png 0/s480x480/ _ _ _n.jpg?oh=b8a1de0b26adab75 7edc9d52c85acdd8&oe= &__gda__= _750da217cc5493e3aeec c9f5 0/s480x480/ _ _ _n.jpg?oh=b8a1de0b26adab75 7edc9d52c85acdd8&oe= &__gda__= _750da217cc5493e3aeec c9f5