1. Business Organization
Chapter 8.1 notes
Business Organization

2. Sole Proprietorship a business run by one person
smallest type of business organization
most numerous but least profitable

3. Advantages of a Sole Proprietorship
ease of start-up
ease of management
owner gets all the profits
taxes paid only on the owner’s personal income
psychological satisfaction of owning one’s business/ having control
ease of closing the business

4. Disadvantages of a sole proprietorship
owner has unlimited liability – owner is personally and fully responsible for all losses and debts of the business
Limited funds
owner may not be able to hire enough personnel or keep inventory
limited managerial experience
hard to attract qualified employees
business has limited life – firm legally ceases to exist when the owner dies or sells the business.

5. Example Mary Kay Ash – Mary Kay Inc.
Was passed up for a promotion, decided to start own business to reward women
By 2005 was a global company with $2 billion in sales

6. Assignment
Pg. 231 #’s 2-5
Write the question!

7. Chapter 8.2 notes
Partnerships

8. Partnerships business jointly owned by two or more persons. Types:
general partnership – all partners are responsible for the mgmt and financial obligations
limited partnership – at least one partner is not active in the daily running of the business.

9. Cont’d
Limited liability partnership (LLP) – all partners are limited and not responsible for debts or liabilities of other partners

10. Advantages of a Partnership
ease of start-up
ease of mgmt
lack of special taxes
easier to raise capital through bank loans or new partner
larger size aids efficient operations
easier to attract talented employees

11. Disadvantages
Unlimited liability - partners are responsible for the acts of every partner except in a limited partnership
limited life - if a partner leaves or dies it must be dissolved and reorganized
potential for conflict

12. Examples Law firms Accounting firms Doctors offices
Interesting fact: most partnerships bring in less than $25,000 a year

13. 8.3/8.4 notes

14. Corporations A business owned by stock-holders
Stockholders/shareholders – investors who become owners of the firm
If profitable, may pay dividends

15. Advantages of a corporation
ease of raising capital
professionals usually run firm
owners have limited liability
Unlimited life of corp.
Easy to transfer ownership (buying/selling stock)

16. Disadvantages of a corporation
Start-up cost/effort
Little control of business
double taxation
subject to gov’t regulation

17. Business Consolidation
Horizontal merger – produce same product Ex: two banks; Reebok and Adidas
Vertical merger – different steps of production Ex: car co and tire co;
Conglomerate – 4 or more merge that are unrelated

18. Franchise
Business that licenses rights to sell it’s products to individual owners
Examples: McDonald’s, KFC/Taco Bell, Subway

19. Advantages
Provides good training and products
Pays for advertising

20. Disadvantages
Can be expensive
Share profits
Have to follow rules

21. Non-profit Organization
Aims to benefit society
Examples: schools, churches, Salvation Army, Red Cross

22. Cooperatives Operated for benefit of owners who are also customers
3 Types: Consumer, Producer, Service

23. Word bank for Quiz on Ch. 8!!!!
Sole proprietorship Partnership Corporation Stock Cooperative Conglomerate Franchise Unlimited liabililty Unlimited life Multinational Bond Non-profit organization Horizontal merger Vertical merger Limited liability