1. Business Organizations

2. Business organization
establishment formed to carry on commercial enterprise

3. TYPES…

4. a business owned by one person
Sole Proprietorship
a business owned by one person
Characteristics…
Earns all profits
Responsible for all losses
75% of all businesses
Only generate 6% of sales
Usually in the service industry
Default business structure

5. Hair Salon
EXAMPLES
Lemonade stand

6. Advantages Disadvantages Easy to start up Unlimited personal liability
Authorization- must obtain a business license
Site permit
Name- register name of business
Few regulations
Zoning laws
Health codes
Get all the profits!
Easy to discontinue (not a complicated business structure)
Unlimited personal liability
Limited access to resources
Paying for the equipment all by yourself
Not enough workers
Lack of permanence
B/c so easy to discontinue

7. partners share equally in responsibility and liability
Partnerships
owned by 2 or more people who agree on a specific division of responsibilities and profits--- Often called a Partnership Agreement
partners share equally in responsibility and liability

8. Advantages Disadvantages Ease of start up Unlimited liability
RUPA- Revised Uniform Partnership Act
Ordering common ownership interests, profits and loss sharing, and shared management responsibilities
Shared decision making
Usually in finance, insurance, and real estate
Larger pool of capital
Assets
Unlimited liability
Potential for conflict

9. legal entity owned by stock owners
CORPORATION
legal entity owned by stock owners

10. Characteristics
More spread out in services, retail, finance, insurance, and real estate
Structure- stock holders elect a board of directors
Separate legal entity (Can sue/ be sued)

11. Articles of Incorporation
Name
Statement of purpose
Longevity of corp.
For perpetuity- w/o limit
Founders’ name and addresses
Business headquarters address
Method of fund-raising
Rules for corp.’s management
Par value of stock

12. 2 Types…
Closely held corporations- issue stock to only a few people, usually family members
Publically held corporations- sells stocks on the public market

13. Advantages Disadvantages Limited liability for owners
Transferable ownership- stockholder advantage
Ability to attract capital- corporation advantage
Ability to hire experts rather than rely on their own knowledge
Long life- unless there is a specific termination date, corp. can continue
Difficulty and expense of start-up
Double taxation
Tax on corporation income
Tax on dividends
Tax on selling shares- capital gains tax
Loss of control
Owners don’t necessarily control the running or the decisions of the corp.
More regulation
SEC- securities and exchange commission

14. Corporate Combinations
Multinational corporation
Horizontal mergers
Conglomerate
Vertical mergers

15. Possible monopoly could arise
Horizontal Mergers
Join 2 or more firms competing in the same market with the same good/service
Possible monopoly could arise

16. Vertical Mergers
Join 2 or more firms involved in different stages of producing the same good or service

17. merging more than 3 firms that make unrelated products
Conglomerate
merging more than 3 firms that make unrelated products

18. Multinational Corporation
Large corporation that sells goods and services around the world
Must obey laws and pay taxes in each country in which they operate

19. Advantages Disadvantages
Provide jobs and products around the world
Spread new technologies and production methods
Unduly influence the culture and politics of the country in which they operate
Concern about low wages and poor working conditions in poorer countries

20. THE BUSINESS POPULATION Business Shares of Domestic Output
Percentage of Firms
Percentage of Sales
Corporations
20%
Partnerships 5%
Corporations
90%
Sole
Proprietorships
75%
Partnerships 8%
Farmer
Sole Proprietorship 2%

21. Other Organizations Franchise Nonprofit Organization
Cooperative Organization

22. Franchise
Semi-independent business that pays fees to a parent company in return for a contract for exclusive rights to sell a certain product or service

23. “The Co-Op” Cooperative Organization
owned and operated by a group of individuals for their shared benefit
“The Co-Op”

24. Nonprofit organizations
In the business of benefitting society, tax-exempt, YMCA, religious organizations, etc
Professional organization- improve the image, working conditions, and skill level of people in a particular occupation, ABA
Labor unions- organized group of workers whose aim is to improve working conditions, hours, wages, and fringe benefits
Trade associations- promotes interest of a particular industry, American Marketing Association
Business associations- promotes collective business interests for an area or for a group of similar businesses, BBB