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Chapter 5 Business in the U.S. Economy Forms of Business Ownership Organizational Structure for Businesses
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Objectives Students will be able to: Describe the changes that have occurred in U.S. Employment and changes in the types and numbers of businesses. Identify and describe the forms of business ownership and outline the strengths and limitations of each. Explain how to organize effective businesses and alternatives structures for businesses.
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The Changing U.S. Job Market Looking at your future, where do you see your self in 10 years? 1996 to 2006 total employment grew 14% 2007 = 144 million people held a job 2014 = Projected 165 million (increase 13%)
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Employment Data Baby Boomers (1946-1964) Dominate labor market until 2010 (Retirement) Avg. age will decrease from 2010 – 2014 (70 to 66%)
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Pressure on Employees Technology was designed to limit the amount of hours worked. Technology has resulted in downsizing within our economy. Personal and Professional Life Less time with families Added responsibilities at home and work. Contingent Worker Someone who has no explicit or implicit contract for long-term employment.
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Business and The Economy Size 19.5 million businesses (No Employees only the Owner) 4.5 million businesses ( Less than 20 employees) 26,000 businesses (20-100 people) 107,000 businesses (100 or more people) 890 businesses (10,000 people)
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Business and The Economy Businesses: Provide employment for millions of people. Wages are used to purchase goods and services. Profits earned pay owners and investors. Government spending helps generate more agencies that improve our standard of living. Help satisfy the consumers needs and wants.
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Impact on a Community How do businesses affect their surrounding community? Creates Job Helps pays for transportation, food, etc… Stimulates a thriving community
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Business Activities Generating Ideas For new products and services To satisfy customers needs and wants Raising Capital To purchase capital resources Create new jobs Generate a successful business
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Business Activities Employing and Training Personnel Businesses with no employees will grow and add parts to a business to make it run successfully. Businesses have procedures for: Recruiting Training Employees Newer Employee New methods in performing job tasks
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Business Activities Buying Goods and Services Purchase goods and services for their own personal use. Purchase tangible and intangible goods: Computer, Equipment, etc.. (tangible) Advertising, Legal Advice, Accounting, etc… (intangible) Marketing Goods and Services Generating awareness for a companies goods and/or services. Maintaining Business Records Performance Tracker Order and Payment Records
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Types of Businesses Producers Create the products and services used by individuals and other businesses. Intermediaries Businesses involved in selling the goods and services of producers to consumers and other businesses. Service Businesses Carries out activities that are consumer by its customers.
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Sole Proprietor Business is owned and operated by one person. Easiest form of business to start and end. Pros: Sole control over all business decisions. You determine how profits are used. Cons: Owner is responsible for all debt. Any asset (not businesses related) can be claimed to satisfy any outstanding debt.
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Partnership Business owned and controlled by two or more people who have entered into an agreement. Similar to a Sole Proprietor Both owners are responsible for key business decisions. Each partner is liable for all the debts of the business if it should fail.
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Corporation Separate legal entity formed by documents filed with a state. Owned by one or more shareholder and managed by a Board of Directors. Meet all legal requirements. Profits can not be accessed unless Board of Directors approve. Unlimited Liability (Money invested will not be lost)
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Bell Ringer…. What are three forms of ownership? Proprietorship Partnership Corporation
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Bell Ringer…. How do some of the business activities contribute towards our society? Provide Jobs Create wages to purchase goods/services Creates transportation, food, clothing, etc… Training for employees
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Forms of Businesses Businesses Ownership Proprietorship Partnership Corporation
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Choosing a Form of Ownership Choosing a Sole Proprietorship Owners choose this form of ownership for freedom of working by themselves. (Total Control) Businesses formulated from hobbies or operate a business on a part-time basis. Start-up is easy to do, must obtain: Licenses Permits Financial Backing Income is taxed as personal income (Expenses are paid out of your own pocket) Any debt comes from the owner’s own personal assets.
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Choosing a Form of Ownership Choosing a Partnership: Can be formed by a verbal or written agreement between two or more people. The agreement will show how profits and loses will be divided among the partners. Authority is based on amount invested in the business. Very similar to a Sole Proprietorship AdvantagesDisadvantages Multiple InvestorsLimited Control Share IdeasNo Protection of Assets
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Choosing a Form of Ownership Choosing a Corporation Popular forms of ownership for large businesses. Corporations are subject to more laws and are more difficult to form than partnerships and proprietorships. Treated as an individual by the government. Follow the laws of the state in which they are organized. Articles of incorporation A written legal documents that defines ownership and operating procedures and conditions for the business
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Choosing a Form of Ownership Choosing a Corporation Corporate Bylaws (Code of Ethics) Formulate a Board of Directors (Decision Makers) Selling and Purchasing of Stock (A form of ownership) Pay corporate taxes on profits earned. Investors also pay taxes on their earnings
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Other Forms of Ownership Specialized Partnerships and Corporations Limited Liability Partnership Identifies some investors who cannot lose more than the amount of their investment but they are not allowed to participate in day-to-day activities. Joint Venture Two or more businesses combine for a limited time for a specific job task. S-Corporation Income is passed through to the owners based on their investments and is taxed during their individual tax returns
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Other Forms of Ownership Specialized Partnerships and Corporations Limited Liability Company (LLC) Provided liability protection for owners. No Articles of incorporation or bylaws are needed. Nonprofit Corporations A group of people who joint to do some activity that benefits the public.
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Other Forms of Ownership Cooperative and Franchises Franchise Written contract granting permissions to operate a business to sell products and services in a set way. McDonald’s Wendy’s Taco Bell, KFC, Long John Silvers, A&W (Yum Brand)
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Organizational Structure Mission Statement: Direction for a business in which it looks to achieve. Short statement, written, and expresses why the business exists. Goals: Precise statement of results the business expects to have. Policies and Procedures: Guidelines and descriptions about how the business will be ran.
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Identify Your Goals Since a mission is a where the business can see themselves in the future. I want you to look at your own goals for the future. On the index card, identify the following: What is your goal for this school year? Where do you see yourself in 5 years? How do you plan to achieve those goals?
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Principles of Effective Organization Responsibility, Accountability, and Authority Obligations Rights to make decisions Taking responsibility for the results achieved. Unity of Command There is a clear reporting relationship for all staff of a business. Span of Control Number of employees who are assigned to particular work task and manager.
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Organizational Structure Diagram that shows the structure of the organization, classifications of work and jobs, and the relationships amount those classifications
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Organizational Structure Functional Organizational Structure Work is arranged within main business functions such as production, operations, marketing, and human resources. Advantage: Working with other who have the same job skills Matrix Organizational Structure Work is structured around specific projects, productions, or customer groups.
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