1. Business Organizations
CH 8.1 Sole Proprietorships
Role of sole proprietorships
Advantages/Disadvantages

2. Sole Proprietorships
Most common form of business organizations in the US - about 75%
Business owned and managed by a single person
All the profits and debts
75% of businesses, but only about 6% of total sales

3. 0.9%
0.4% 9% 8%
69%
12%
Size by $$
13%
48%
16%
Size by type

4. Advantages Relatively easy to start up Some minimum requirements
A little paperwork and some legal expenses
Some minimum requirements
Authorization - business license
Site permit
Register the name

5. Advantages Few regulations Owner gets all the profit Full Control
Least regulated form of business
Zoning Laws
Separate areas are designated for commercial and residential uses
Owner gets all the profit
Full Control
Easy to get out of business
Cover debts and taxes

6. Disadvantages Unlimited Personal Liability Limited access to resources
Legal obligation to pay debts
Limited access to resources
Barriers to entry?
Physical/ Human Capital?
Lack of Permanence
Limited life expectancy?
Benefits to employees
Lack of experienced employees
Responsibility

7. Partnerships CH 8.2 Business owned by two or more people
Specify division of profits and responsibilities
About 7% of all businesses in the US
5% of all sales in the US

8. 15% 9%
59% 4% 8% 4% 8%
18% 9%
54%

9. Types of Partnerships General Partnership Limited Partnership
Responsibilities and liability shared equally
Doctors, lawyers, construction companies
Limited Partnership
Liability falls on one person
More control to the general partner
Other partners only contribute $
Lose only investments

10. Types of Partnerships Limited Liability Partnership (LLP)
Every partner is a limited partner
Exempts each of them from each other’s mistakes
Lawyers, Physicians, dentists, accountants

11. Advantages Easy to start No written agreement necessary
Articles of partnership
Spells out rights and responsibilities
Sharing of profits and losses
How new partners can join
Uniform Partnership Act
State law to establish rules for partnerships
Common ownership interests
Shared management responsibilities

12. Advantages Profits are shared however the partnership decides
No regulations
Specialization
Skills brought to business
Larger pool of capital
More people means more assets
Prestigious
Taxes
No taxes on business, just income generated

13. Disadvantages Unlimited liability Conflict
Actions of one partner can jeopardize everyone else
Pick partners carefully
LLP
Conflict
Goals, work habits, ethics, etc.
Communication

14. CH 8.3 Corporations, Mergers, and Multinationals
Getting people to invest in your company is another way to allow your company to grow
Corporations - the most complex of the business orgs.
Legal entity owned by individual stock holders, each of which has limited liability of debts
Stock (shares) represent the portion of ownership

15. Corporations Different than SP’s 20% of businesses in US
Defined as a separate entity
Must pay taxes
Makes contracts
Sues/ gets sued
20% of businesses in US
90% of all the products sold

16. $
19%
23%
11% 6%
10%
31%
Type
34%
p.196
15%
17%

17. 2 Types of Corporations Closely Held Corporations
Stock issued to only a few people
Usually family members, passed down
AKA - privately held corporations
Publicly Held Corporations
Many shareholders who buy and sell stock

18. Structure Owners elect a board of directors
Directors make all the decision making
Appoints corporate officers that oversee production
Officers hire managers, who hire employees

19. Advantages
Incorporation - forming of Corp. serves interests of both individuals and the Company
Limited liability
Transferable ownership
Ability to attract capital
Longer life

20. Individual advantages
Limited Liability
No real responsibility
Invest your $ for a ROI, can’t lose more
Flexibility -
Ability to sell your stocks and move on
Start losing money, not responsible for company debts

21. Advantages for Corporations
More potential for growth
Easier to raise $
Sell as much stock as charter will allow
Bonds - certificates sold that guarantee interest
Experts run business
Long Life
Stock is transferable
Can continue indefinitely

22. Disadvantages Much harder to start up More expensive
License - Certificate of Incorporation
(Corporate Charter)
Name
Statement of purpose
Length of time it will run
Founders’ names
HQ address
Method for fund raising
Rules for management

23. Disadvantages Double Taxation Loss of Control More Regulation
Seen as its own entity, taxed in addition to income of individuals
Tax when shares are sold too
Loss of Control
More Regulation
Meetings for shareholders
File quarterly reports to Security Exchange Commission (SEC)
Fed agency that regulates the stock market

24. Corporate Combinations
Three major types
Horizontal Merger - two or more in the same market

25. Combinations
Vertical Mergers - joining of different stages of production
Carnegie Steel

26. Combinations
Conglomerate - combination of companies that have nothing to do with each other
No one part of the business earns substantially more than the others

27. Multinationals (MNC’s)
HQ in one country with branches in others
Must follow laws of country they are operating in as well as pay taxes
Some of the biggest have budgets larger than Govt budgets

28. Advantages Disadvantages Provide jobs worldwide Spread technology
Improve standard of living
Influence politics, culture
Low wages offered
Disadvantages

29. Other Organizations CH 8.4
Business franchises
Semi independent
Pays fees to franchisers
Exclusive rights to sell products
Fast food, hotels,

30. Advantages Reputation Training and support Standardized quality
Nationalized advertising
Financial assistance
Centralized buying power
Bulk saving passed on

31. Disadvantages High fees/ royalties Strict standards
Hours, dress codes, procedures
Purchasing restrictions
Must buy from certain approved suppliers
Limited product line

32. Cooperatives
Owned and operated by a group of individuals for their shared benefit
Three categories
Consumer Co-ops
Housing, Colombia House
Service Co-ops
Credit unions
Producer Co-ops
Agriculture/ sell crops for you

33. Nonprofit Orgs. Usually work to benefit society some how
Museums, Public Schools, Red Cross, Salvation Army, hospitals, churches
No income tax
Almost all provide a service rather than a good

34. Nonprofit Orgs. Some provide services to specific groups
Professional orgs - improve work conditions, image, skills
American Bar Association - lawyers
American Medical Association - doctors
Business Associations - promotes business interests in a particular area
Chamber of Commerce, Better Business Bureau
Trade Associations
Promote interests of particular industries
Labor Unions