1. Business Organizations

2. Formed to carry out commercial enterprises
Company or firm
Sole Proprietorship= managed by one individual (75 % of all businesses)

3. The Single Entrepreneur can…
Start up with little paperwork
Business license
Site Permit to use a building as their facility
Name of the Business has to be registered

4. Zoning Laws
Cities and towns designate specified areas for business use and residential use
Zoning laws can keep business owners from operating from their homes

5. Advantages of Sole Proprietor
Profit
Full Control
Easy to Discontinue

6. Disadvantages to Sole Proprietor
Personal Liability
(repay all loans that were used to start up the business)
(pay wages, or get work done yourself)
Limited Access to Resources
(pay for new equipment out of pocket)
Lack of Permanence
(difficult to find lasting workers or experienced workers)

7. Partnerships
Two or more persons agree on a division of labor and profits
3 types of partnerships
General-share equally, responsibility and liability (doctors, lawyers, accountants)

8. Partnership Types Cont.
Limited-only one partner has personal unlimited liability
Remaining partners only contribute money and do not actively manage the business
Limited Liability Partnership- all partners are limited partners, which limits their liability if for example their partner makes a mistake

9. Advantages of Partnerships
Ease of start-up
Articles of Partnership (the agreement of the partnership)
Uniform Partnership Act- establishes rules for partnerships that don’t create their own articles (profit and loss management, shared management responsibilities)

10. Advantages Cont. Shared Decision making and specialization
Larger pool of capital because of greater number of assets
Little government regulation
Taxation-business itself does not pay taxes
Partners pay taxes of their share of income that the partnership generates

11. Disadvantages of Partnerships
Unlimited Liability- one partners actions can cause other partners to suffer
(doctor sued for malpractice, all the doctors in the partnership stand to lose)
Potential for Conflict-

12. Corporations
A Corporation is an entity owned by individual stockholders each of whom faces limited liability for the firm’s debts.
Corporations pay taxes, make contracts, engage in business, sue parties and get sued.
20 % of all US businesses
90% of all products sold in the nation

13. Types of Corporations
Closely held corporations- stock is rarely traded, but passed within family members.
Publicly held corporations- many shareholders who can buy or sell stock on the open market.
Corporation owners (stockholders) elect a board of directors to make all major decisions

14. Advantages of Corporations
Limited liability
Transferable ownership
Ability to attract capital
Raise money by borrowing it (selling bonds)
Bond-a formal contract to repay borrowed money with interest at fixed intervals
Long life
Owners don’t need special management skills because of the large number of owners and ability to hire experts

15. Disadvantages to Corporations
Expense and difficulty of start up
Double taxation (owners pay taxes on their income and the corporation income)
Potential loss of control by the founders
More legal requirements and regulations (monitored by the SEC)

16. To Start a Corporation…
A certificate of incorporation is needed with:
The corporate name
Statement of purpose
Length of time that the business will run
Founders names
Business headquarters address
Method of fundraising
Rules for corporation’s management

17. Mergers
Horizontal mergers- join two or more firms comparing the same market with the same good or service
Sprint and Nextel to Sprint
Vertical Mergers- join two or more firms involved in different stages in producing the same good or service.

18. Conglomerates
Firms buy companies that produce totally unrelated goods.
Altria Group (Phillip Morris and Kraft Foods)

19. Multinational Corporation
Corporations that operate in more than one country at a time
Headquarters in one country and branches in another
Must obey laws and pay taxes in each country in which they operate
Provide jobs around the world
Spread technology throughout the world

20. MNC’s Continued
Jobs may provide better living standards for people in their country
On the down side…
Influence culture and politics in other countries
Low wages and poor working conditions

21. Franchise
A Semi-independent business that pays fees to a parent company
In return the company is granted the right to sell a certain product or service in a given area
Parent company is called the Franchiser
Fast food chains

22. Advantages of Franchise
Management training and support
Standardized quality
National advertising
Financial assistance
Centralized buying power (franchisers buy in bulk for all locations and share savings with all branches)

23. Disadvantages to Franchises
High fees and royalties for right to company name
Strict operating standards (hours of operation, dress code, etc.)
Purchasing restrictions
Limited Product Line

24. Cooperative
Business organization owned and operated by a group of individuals for their shared benefit.
Consumer Cooperatives-sell merchandise to their members at a lower cost
Pass savings on to their member
Examples: book clubs, compact disc clubs, Sam’s, Costco

25. Service Cooperative-provide a service instead of a good
Service Cooperative-provide a service instead of a good. Health care, legal help, baby sitting are examples that are offered at reduced rates to their members
Producer Cooperatives-agricultural marketing cooperatives that help members sell their products.

26. Non-Profit Organizations
In the business of benefiting society
Function like business organizations
Do not generate profit
Museums, hospitals, churches, American Red Cross, and many others
Tax Exempt
Operative with government support

27. Professional Organizations
Work to improve the image, working conditions, and skill levels of people in particular occupations.
National Education Association, American Bar Association, American Medical Association