1. Economics – Chapter 3, Section 1 Forms of Business Organizations
Sole Proprietorships
A business owned and run by one person.
Smallest type of business organization in size, yet the most numerous and profitable.

2. Economics – Chapter 3, Section 1 Forms of Business Organizations
Advantages of Sole Proprietorships
Ease of start-ups.
Ease of management.
Owner gets all the profits.
Business itself pays no income taxes.
Taxes paid only on the owner’s personal income.
Psychological satisfaction of owning one’s business
Ease of closing the business.

3. Economics – Chapter 3, Section 1 Forms of Business Organizations
Disadvantages of Sole Proprietorships
Owner has unlimited liability.
Hard to raise financial capital.
May not be able to hire enough personnel or stock enough inventory to operate efficiently.
May have limited managerial experience
Hard to attract qualified employees.
Business has limited life and legally stops when the owner dies or sells the business.

4. Economics – Chapter 3, Section 1 Forms of Business Organizations
Partnerships
A business jointly owned by two or more persons.
It is the least numerous among business organizations
Second smallest proportion of sales and net income.

5. Economics – Chapter 3, Section 1 Forms of Business Organizations
General partnerships
all partners are involved in the management and finances.
Limited partnership
at least one partner is not involved in management.
Usually helped finance the business.
Articles of Partnership documents spell out how the partners divide up the profits or losses.

6. Economics – Chapter 3, Section 1 Forms of Business Organizations
Advantages of Partnerships
Ease of start-up
Ease of management
No special taxes on a partnership
Easier to raise capital through bank loans or new partner
Larger size aids efficient operations
Easier to attract skilled employees

7. Economics – Chapter 3, Section 1 Forms of Business Organizations
Disadvantages of Partnerships
Partners are responsible for the acts of each partner, except in a limited partnership where the limits are spelled out
Limited life - partnerships ends
if a partner leaves
Potential for conflicts between
partners.

8. Economics – Chapter 3, Section 1 Forms of Business Organizations
Corporations
Business organization recognized by law as a separate legal entity with all of the rights of an individual.
Corporations receive a charter, or government permissions to create a corporation, which includes details about stock ownership.
Investors who buy stock in a corporation become owners of the firm.

9. Economics – Chapter 3, Section 1 Forms of Business Organizations
Corporations
Shareholders - Board of Directors - CEO or President - Management Team
Common Stock
Preferred Stock
Proxy
Dividends

10. Economics – Chapter 3, Section 1 Forms of Business Organizations
Advantages of Corporations
Ease of raising capital.
Professionals may run the firm instead of the owners (shareholders).
Owners have limited liability.
Business’s life is unlimited.
Easy to transfer ownership.
Corporations are responsible for the
Largest portion of sales in the US.

11. Economics – Chapter 3, Section 1 Forms of Business Organizations
Disadvantages of Corporations
A charter is expensive.
Ownership and management are separated so shareholders have little say in running the business.
Corporate income is taxed twice.
Subject to government regulation.

12. Economics – Chapter 3, Section 1 Forms of Business Organizations
Proprietorships, Partnerships and Corporations
All up in Yo Business
Types and Features of Business Entities

13. Economics – Chapter 3, Section 2 Business Growth and Expansion
Growth Through Reinvestment
Business revenue can be used to invest in factories, machinery, or new technologies.
Before reinvesting, a business must estimate its cash flow.

14. Economics – Chapter 3, Section 2 Business Growth and Expansion
The business first records its total sales and then subtracts all expenses, taxes, and depreciation.
The results is the business’ net income.
Sales REVENUE – EXPENSES = PROFIT

15. Economics – Chapter 3, Section 2 Business Growth and Expansion
Growth Through Mergers
Merger: a combination of two or more businesses into one business.
One business gives up its separate legal entity.
A company may merge with another to:
grow faster
become more efficient
acquire or deliver a better product
eliminate a rival
change its image

16. Economics – Chapter 3, Section 2 Business Growth and Expansion
A horizontal merger is the joining of firms that make the same product.
A vertical merger is the joining of firms involved in different stages of manufacturing or marketing.

17. Economics – Chapter 3, Section 2 Business Growth and Expansion
A conglomerate is composed of four or more businesses, each making unrelated products, none of which is responsible for a majority of its sales.
A multinational is a corporation with manufacturing and service operations in several countries, which are subjected to each nation’s business regulations.

18. Economics – Chapter 3, Section 3
Community and Civic Organizations
A nonprofit organization is in business to promote its members’ collective interests, not to seek financial gain.
Many nonprofit organizations incorporate to take advantage of a corporation’s unlimited life and limited liability.

19. Economics – Chapter 3, Section 3
If the nonprofit organization has money after its expenses are paid, its board of directors may apply the surplus to other projects that further the organization’s mission.

20. Economics – Chapter 3, Section 3
Cooperatives
A cooperative is voluntary association of people who carry on all economic activity that benefits its members.
Consumer cooperatives buy food and other necessities in bulk. Members donate time to the co-op, and members pay lower prices for goods.

21. Economics – Chapter 3, Section 3
Service cooperatives, such as credit unions, offer services to its members at lower rates.
Producer cooperatives help members, such as farmers, promote or sell their products.

22. Economics – Chapter 3, Section 3
Labor, Professional, and Business Organizations
Labor unions represent workers’ interests and negotiate with management through collective bargaining, which the process by which wages, hours, rules, and working conditions are negotiated and agreed upon by a union with an employer for all the employees collectively whom it represents.

23. Economics – Chapter 3, Section 3
Professional associations set standards for those in the profession and influence gov’t policies on issues concerning
Business associations are industries, or trade associations, that represent specific kinds of businesses.
Example: the Better Business Bureau = help protect the consumer.

24. Economics – Chapter 3, Section 3
Government
Gov’t plays a direct role in the economy when its agencies produce and distribute goods and services to consumers.
The TVA (electricity)
The US Postal Service (mail delivery).

25. Economics – Chapter 3, Section 3
Gov’t corporations have boards of directors, but Congress’s money, rather than investors’ money, support their work.
Gov’t plays an indirect role when it regulates public utilities or when it grants money to people, such as in the form of Social Security and student financial aid.