1. Click here to advance to the next slide.

3. Read to Learn
Describe the advantages and disadvantages of the three major forms of business organizations.
Describe how cooperatives and nonprofits are like and unlike corporations and franchises.

4. The Main Idea
Sole proprietorships, partnerships, and corporations are the most common forms of business organization. Cooperatives, nonprofits, and franchises are other forms.

5. Key Concepts
Organizing a Business
Other Ways to Organize a Business

6. The three main types of business organizations are:
Organizing a Business
The three main types of business organizations are:
Sole Proprietorships
Partnerships
Corporations

7. U.S. Sole Proprietorships, Partnerships, and Corporations
Figure 6.1
U.S. Sole Proprietorships, Partnerships, and Corporations

8. Sole Proprietorships
About three-quarters of all businesses in the United States are sole proprietorships.
sole proprietorship
a business owned by one person

9. Graphic Organizer Advantages of Sole Proprietorships Easy to start
Proprietors are in charge
Proprietors keep all the profits
Taxes are lower than a corporation’s

10. Sole Proprietorships
A major disadvantage of owning a sole proprietorship is that the owner has unlimited liability.
unlimited liability
when the owner is responsible for the company’s debts

11. Graphic Organizer Disadvantages of Sole Proprietorships
Limited access to credit
Many run out of money
The owner may not have the necessary skills
The business ends when the owner dies

12. To start a partnership, you need a partnership agreement.
Partnerships
To start a partnership, you need a partnership agreement.
partnership
a business owned by two or more people who share its risks and rewards

13. Graphic Organizer Advantages of Partnerships Easy to start
Easier to obtain capital
Easier to obtain credit
Not dependent on a sole person
Only taxed once
Diversity in skills

14. Graphic Organizer Disadvantages of Partnerships
Business risk is shared
Unlimited legal and financial liability is shared
If one partner makes a mistake, all partners are responsible

15. Corporations
To form a corporation, the owners must get a corporate charter from the state where their main office will be located.
corporation
a company that is registered by a state and operates apart from its owners

16. Limited liability is a major advantage of a corporation.
Corporations
Limited liability is a major advantage of a corporation.
limited liability
holds a firm’s owners responsible for no more than the capital that they have invested in it

17. Graphic Organizer Advantages of Corporation Limited liability
Ability to raise money by selling stock
Business does not end when an owner dies

18. Graphic Organizer Disadvantages of Corporation Double taxation
More government regulation
Difficult and costly to start
Income is taxed.
Stockholders pay taxes on profits issued to them

19. Other Ways to Organize a Business
Other ways to organize a business include:
Cooperative
Nonprofit Organization
Franchise

20. Other Ways to Organize a Business
The purpose of a cooperative is to save money on the purchase of certain goods and services.
cooperative
an organization that is owned and operated by its members

21. Other Ways to Organize a Business
A nonprofit organization does not pay taxes because it does not make a profit.
nonprofit organization
a type of business that focuses on providing a service, not making a profit

22. Other Ways to Organize a Business
To run a franchise, you have to invest money and pay franchise fees or a share of the profits.
franchise
a contractual agreement to use the name and sell the products or services of a company in a designated geographic area

23. Car Sharing
Car sharing is a popular European process in which many households share vehicles.
Mobility CarSharing cooperative in Switzerland has over 50,000 clients.

24. What is the difference between a sole proprietorship and a partnership?
A sole proprietorship is owned by one person. A partnership is owned by two or more people.

25. If a partner makes a bad decision, what responsibility do the other partners have?
All partners share responsibility for a
bad decision.

26. Why are cooperatives formed?
so that the members have advantages
in buying and selling products and
services

27. End of

28. Click here to advance to the next slide.

30. Read to Learn
Differentiate the six types of businesses.
Describe the five functions of business.
Discuss how the five functions of business relate to each other.

31. The Main Idea
There are many different types of businesses. The five functions of business are involved in every one.

32. Key Concepts
Types of Businesses
Functions of Business
How the Functions of Business Are Interdependent

33. Functions of Businesses
Graphic Organizer
Types of Businesses
Functions of Businesses
Producers
Processors
Manufactures
Intermediaries and Wholesalers
Retailers and Service Businesses
Production and Procurement
Marketing
Management
Finance and Accounting

34. Producers
A producer may be found in industries such as agriculture, mining, fishing, or forestry.
producer
a business that gathers raw goods

35. A processor may, for example, turn crude oil into gasoline.
a business that changes raw materials into more finished products

36. Manufacturers
Cars, CDs, and computers are examples of goods that are made by a manufacturer.
manufacturer
a business that makes finished products out of processed goods

37. Intermediaries and Wholesalers
An intermediary buys goods, stores them, and then resells them.
intermediary
a business that moves goods from one business to another

38. Intermediaries and Wholesalers
A wholesaler of clothing may buy thousands of jackets from several manufacturers, divide the large quantities into smaller ones, and sell them to retailers.
wholesaler
a business that moves good from one business to another

39. Retailers and Service Businesses
A record store is an example of a retailer.
retailer
a business that purchases goods from a wholesaler and sells them to consumers, the final buyers of the goods

40. Retailers and Service Businesses
Service businesses perform tasks rather than provide goods.
Service businesses employ about three- quarters of the workforce and are rapidly increasing in numbers.

41. Functions of Business
The five main functions of business are:
Production and procurement
Marketing
Management
Finance
Accounting

42. Production and Procurement
Production and procurement are closely related functions of business.
production
the process of creating, expanding, manufacturing, or improving goods and services
procurement
the buying and reselling of goods and services that have already been produced

43. Marketing involves getting consumers to buy a product or service.
the process of planning, pricing, promoting, selling, and distributing ideas, goods, and services

44. To Advertise or Not
Advertising is used to influence consumers to buy one product or service over another.

45. Management is an important function of business.
the process of achieving company goals by planning, organizing, directing, controlling, and evaluating the effective use of resources

46. Finance and Accounting
Finance requires analyzing financial statements to make future decisions.
finance
the business or art of money management

47. Finance and Accounting
Accounting requires attention to detail and accuracy.
accounting
maintaining and checking records, handling bills, and preparing financial reports for a business

48. How the Functions of Business Are Interdependent
The functional areas of a business depend on each other.
Sometimes, the functional areas of a business conflict with each other.

49. Example of How Functional Areas Depend on Each Other
Graphic Organizer
Example of How Functional Areas Depend on Each Other
A furniture maker’s sales are decreasing.
The accounting and finance department notice decreasing sales.
If the furniture is too highly priced, more efficient procedures will have to be implemented.
A new marketing plan is created.
The accounting and finance department will monitor the effects of new marketing efforts.

50. Example of How Functional Areas Conflict with Each Other
Graphic Organizer
Example of How Functional Areas Conflict with Each Other
Management wants to increase sales by 20 percent within three years.
The production department suggests improving quality.
The marketing department requests more funds for projects.
Accounting says there is not enough money for either plan.
The final plan involves ideas from all the functions of business.

51. What is the difference between a producer and a processor?
A producer gathers or creates raw products. A processor changes raw products into more finished products.

52. Identify the five functions of business.
production and procurement, marketing,
management, finance, and accounting

53. Give an example of how the accounting and finance functions can affect a business’s marketing and production processes.
If the financials show little profits, new
marketing plans may be developed and new production procedures may be implemented.

54. End of