1. Business Organization

2. Business Organization
Def: An establishment formed to carry on commercial enterprise.
3 main types:
Sole Proprietorship
Partnerships
Corporations
Others, less common
Business Franchises, Cooperatives, Nonprofits

3. Sole Proprietorship
Def: a business org. owned and managed by a single individual
Sole Prop. Are the most common form of business, but are small, generating only 6% of all sales.

4. Advantages of Sole Proprietorships
Ease of start-up
Relatively few regulations
Sole receiver of profit
Full control
Easy to discontinue

5. Disadvantages of Sole Proprietorships
Unlimited Personal Liability: Owner is legally bound to pay all business debts.
Limited Access to Resources: Lack of money, capital, etc prevent sole proprietorships from becoming large.
Lack Permanence: when the owner closes shops, retires etc, the business ceases to exist.

6. Partnerships
Def. business owned by two or more people who share responsibility and liability for the business

7. Do Now Please answer the following questions on your notes sheet:
1) What are the three main types of business organizations?
2) Define Sole Proprietorships AND partnership (in your own words-Provide an example of each)
3) What are the advantages and disadvantages of a sole proprietorship?

8. Advantages of Partnerships
Ease of start-up
Shared decision making and specializations- Partners divide workload and skill to business
Larger pool of capital– partners both invest funds into the business
Taxation: Partners pay their own taxes, but the business does not

9. Disadvantages of Partnerships
Partners are bound by each other’s actions (i.e. if your partner makes a stupid mistake, you are stuck with it!)
Potential for conflict- arguments disputes can cause major problems
At least one partner has unlimited liability

10. Corporations
Def: A business that is a legal entity (it exists on its own with rights like a person) owned by individual stockholders
Stock: sometimes called shares, represent a stockholder’s portion of ownership of a corporation

11. Advantages of a Corporation
Advantages for the stockholders
Do not carry responsibility for corporation’s actions (corporations does something illegal or owe debt, stockholders are not responsible)
Shares of stocks are transferable, they can be sold to others for a profit.

12. Advantages of a Corporation
Advantages for the corporation
Have potential for more growth than other business forms
Can borrow money by selling bonds
Can hire the best labor (human resources) and best equipment (capital resources)
Have long lives

13. Disadvantages of Corporations
Difficult and expensive to start up
Double Taxation (the corporation must pay taxes on income and stockholders pay taxes on profit)
Loss of control (managers and board members control, not the owner)
More regulation (government regulates more than any other bus. org.)

14. Growth of Corporations
Mergers are combinations of two or more corporations into a larger corporation.
Watched by the government---no monopolies.

15. 3 Types of Mergers
Horizontal Merger: combination of 2 or more corporations who provide the same good or service (ex: Cingular and AT&T)

16. Vertical Merger: Combine 2 or more firms involved in different stages of producing a good or service. (ex: Carnegie Steel owned the Iron mines and Steel Refineries)

17. Conglomerate: a combination of 3 or more businesses making unrelated products. (ex AOL (Internet) Time (news magazine) Warner (TV and movies)

18. Multinational Corporations
Def: Large Corporations headquartered in one country with subsidiaries (smaller branches) throughout the world.
Advantages: Offer products worldwide, spread technology and jobs around the global.
Disadvantages: Influence cultures of other countries with little worker protection (sweatshops, and pollution)

19. Business Franchises
Def. A semi-independent business that pays fees to a larger parent company in return for the right to sell a product or service.
Ex. McDonalds, 7-11, Pizza Hut
Pay money to use the name, symbols, and for help in running the store/restaurant/etc.

20. Advantages of Business Franchises
Management and Training support
Standardized quality
National advertising programs
Financial assistance
Centralized buying power

21. Disadvantages of Business Franchises
High franchise fees and royalties (pay to use name)
Strict operating standards
Purchasing restrictions
Limited product line (can’t sell hot dogs at KFC)

22. Cooperatives
Def: a business organization owned and operated by a group of individuals for their shared benefit.
Ex: Sam’s Club/BJ’s: must pay to be a member and shop there but get benefit of reduced prices. Also credit unions

23. Non-Profit Organizations
Def. Institutions that function like businesses but do not operate for profit. Any earned profits are put back into the organizations, not paid out to share holders. They are exempt from federal income taxes.
Ex. The Red Cross, Goodwill, YMCA, Churches, Labor Unions, Businesses and Trade Associations, the Bar Association, etc.

24. Examples Sole Proprietorships Landscaping Local restaurant
Corner Store
Hair Salon/ Barber shop
Partnerships
Accounting Firms
Law Offices
Doctor/Dentist
Corporations
Walmart
IBM
Xerox
Kodak

25. More Examples Franchises McDonalds KFC Burger King 7-11 Taco Bell
Popeyes
Sports Teams
Cooperatives
Labor Unions
Credit Unions
Business Associations
Sam’s Club/BJ’s
Nonprofit
Churches
Red Cross
Goodwill
YMCA/YWCA
Salvation Army