1. Businesses and Organizations

2. Standards
SSEMI4a: The student will explain the organization and role of business.
SSEMI4a: The student will compare and contrast three forms of business organization—sole proprietorship, partnership, and corporation.

3. Barriers to Entry
Barriers to entry—factors that make it difficult for new firms to enter the market.
Common barriers include…
Start-up costs—expenses a business must pay before the first product reaches a consumer
Technology—some markets require a high degree of tech. know-how.

4. Economies of Scale
Economies of scale—factors that cause a producer’s average cost per unit to fall as its output rises.
i.e. shoes
Mass-produced sneakers can be purchased for less than $10.00…
Hand-made Italian shoes can cost thousands…
One reason for the cost difference is the scale (how big or small) of the production.

5. Sole Proprietorship
A business owned and operated by one person. It is the oldest, simplest, and most common type of business organization.
Advantages:
1. easiest to start-up
2. full control
3. exclusive rights to profits.
Disadvantages:
1. unlimited liability
2. sole responsibility
3. limited growth potential
4. lack of longevity.

6. Partnership Disadvantages— 1. unlimited liability;
A business owned and controlled by two or more people. They’re most often seen in professional fields…
accounting firms,
doctors’ and
lawyers’ offices.
Advantages—
1. easy start-up;
2. specialization (different duties);
3. shared decision making;
4. shared losses.
Disadvantages—
1. unlimited liability;
2. potential for conflict;
3. lack of longevity.

7. Corporations
A business in which a group of owners, called stockholders, share in the profits and losses.
Advantages—
1. limited liability;
2. management is separate from ownership;
3. easy to raise money;
4. longevity.
Disadvantages—
1. heavily regulated by the government;
2. slow decision making;
3. double taxation (profits and dividends).

8. Other Types of Organizations
Franchises—
Owned separate from cooperate
Pay a fee to use the name
Example—McDonald’s.
Cooperative (co-op)—owned collectively by members.
Non-profit organization—a business with goals other than profits. Example—the Red Cross