1. 10/7/20151 Business Organizations Chapter 3

2. 10/7/20152 Sole Proprietorships  Most common form of business organization in the U.S.  Owned & run by one individual  Smallest form of business  Smallest fraction of total sales

3. 10/7/20153 Forming a proprietorship  Easiest form of business to start Only requirements…business license & fees  Advantages Own boss, keep profits, do not have to pay separate taxes  Disadvantages Unlimited liability, hard to raise money, size & efficiency, limited managerial experience, hard to find good employees, & limited life

4. 10/7/20154 Partnerships  Business that is jointly owned by two or more people. Least common type of business organization  Types of partnerships General partnership  Most common form  All partners are responsible for management & financial obligations of business Limited partnership  At least one partner is not active in the daily running of the business.  The limited partner has limited responsibility for debts & obligations

5. 10/7/20155 Forming a partnership  Easy to start up  Articles of partnership Specifies arrangements between partners  I.e. How are profits divided up? How are tasks assigned?  Advantages Ease of start-up, minimal costs, focus on strengths  Disadvantages Conflict, limited life

6. 10/7/20156 Corporations  Form of business organization recognized by law as a separate legal entity  Has all of the rights of an individual  Corporation has the right to buy and sell property, to enter into legal contracts, and to sue and be sued

7. 10/7/20157 Forming a corporation  Must file for permission from national government or state where business will have its headquarters  Charter Government document that gives permission to create a corporation States company’s name, address, purpose, and other features of the business

8. 10/7/20158 Stock  Certificate of ownership in a corporation  Shares of stock are sold to stockholders or shareholders They become part-owners in company Dividends – portion of corporations profits are paid to stockholders

9. 10/7/20159 Corporate Structure  Common stock Most frequently used form of corporate ownership, with one vote per share for stockholders Votes are used to elect a board of directors, which in turn directs the corporation’s business by setting policies & goals

10. 10/7/201510 Preferred stock  Form of corporate ownership without vote  Stockholders get their investments back before common stockholders  Corporation Adv – ease of raising money, limited liability, unlimited life Disadv – double taxation, expensive to set up, less control, more govt regs

11. 10/7/201511 Business Growth & Expansion Section 2

12. 10/7/201512 Merger  Combination of two or more businesses to form a single firm  Can be risky

13. 10/7/201513 Income statement  Report showing a firm’s sales, expenses, net income, and cash flows for a certain period  Shows how a business uses some of its revenue to reinvest in the company

14. 10/7/201514 Net income  Common measure of business profits determined by subtracting all expenses, including taxes, from revenues  Depreciation- a noncash charge the firm takes for general wear & tear on its capital goods  Cash flow- total amount of new funds a business generates from operations

15. 10/7/201515 Growth through mergers  Types of mergers Horizontal – same product Vertical – different stages of production Conglomerates – unrelated products  Reasons for merging Grow faster, efficiency, better product, eliminate rival, change image  Multi-nationals - A corporation that has operations in a # of different countries

16. 10/7/201516 Nonprofit Organizations Section 3

17. 10/7/201517 Nonprofit Organization  Economic organization that operates like a business but does not seek financial gain  I.E. American Red Cross

18. 10/7/201518 Cooperatives  Nonprofit association performing some kind of economic activity for the benefit of its members  Types of cooperatives Consumer Service Producer

19. 10/7/201519 Labor Unions  An organization of workers formed to represent its members’ interests concerning pay, working conditions, and benefits Collective Bargaining  Negotiations with management over issues such as pay, hours, insurance, and other job related matters  Unions also lobby for laws that will benefit & protect their workers

20. 10/7/201520 Professional Association  Nonprofit organization of professional or specialized workers seeking to improve working conditions, skill levels, & public perception of its profession.

21. 10/7/201521 Chamber of commerce  Nonprofit organization of local businesses formed to promote their interests.  Sponsors activities ranging from educational programs to lobbying for favorable business legislation

22. 10/7/201522 Better Business Bureau  Business-sponsored nonprofit organization providing information on local companies to consumers  Also maintain records of consumer inquiries & complaints  Offer consumer education programs

23. 10/7/201523 Government  Direct Role Many government agencies produce & distribute goods/services to consumers. I.E. USPS, FDIC  Indirect Role Acts as an “umpire” to help the market economy operate smoothly & efficiently.  I.E. regulation of public utilities