1. Business Organizations
Chapter 3

2. Sec. 1 Forms of Business Organization
3 TYPES OF BUSINESS ORGANIZATIONS:
Sole Proprietorship
Partnership
Corporation

3. Sole Proprietorship Advantages: 1. Easy to start up
2. Ease of management
3. Owners enjoy profits w/o having to share w/ other owners.
4. Separate income tax
5. “Own boss”
6. Ease to be out of business
Disadvantages:
1.Unlimited Liability
2. Difficulty in raising financial capital
3. Size and Efficiency
4. Limited managerial experience – “no business sense”
5. Difficulty in hiring qualified employees
6. Limited Life

4. Partnerships General (all partners are responsible) vs
Partnerships General (all partners are responsible) vs. limited (partner is not active n the daily business)
Advantages
Ease of establishment
Ease of management
Lack of special taxes on a partnership
Partnerships can usually attract financial more easily then proprietorship.
Large size
Easier to attract top talent into their organizations.
Disadvantages
Partners are responsible for the acts of other partners
Limited Partnership (when a partner dies the partnership must be dissolved or reorganized)
Potential for conflict between partners

5. Forming a Corporation File permission from the nat’l or state gov.
If approved, receives a charter
States the # of shares of stock, or ownership certified in the firm.
These shares are sold to investors, called stockholders or shareholders.
The $ is used to set up the corporations.
If it is successful, eventually each shareholder receives a dividend- (check repressing a portion of the corporate earnings)

6. Corporation Stocks Common Stock
basic ownership of a corp. (elect board members and control the company)
Preferred Stock
- Represents nonvoting ownership shares of the corporation.

7. Corporations Advantages Ease of raising financial capital
Hire managers to run the business
Limited liability to owners (corporation not the owners is responsible)
Unlimited life
Disadvantages
Difficulty and expense of getting a charter (license).
Owners have little say in how the business is run
Double taxation (corporate profit/ personal income)
More government regulation

8. Sec. 2 Business Growth and Expansion
Two Types of Business Growth
Reinvesting some of the Merger
Profits (combination of
two or more business)

9. Mergers Reasons for mergers: To expand and desire to be bigger
Efficiency
Acquire new products lines …ex. AT&T – cable TV, internet access, telephone service
Eliminate the competition…ex. Royal Caribbean bought Celebrity Cruise Lines in 1997/ Staples and Office Depot
Lose its corporate identity … ValuJet merged with AirWays to form AirTran Holdings Corp.

10. Types of Mergers
Horizontal Merger: when two or more firms that produce the same kind of products join forces.
Wachovia is now Chase
Vertical Merger: when firms involved in different steps of manufacturing or marketing join together

11. Conglomerates
When a corporation becomes so large through mergers and acquisitions.
A Conglomerate is a firm that has at least four businesses, each making unrelated products, non of which is responsible for a majority of its sales.
Diversifications (putting all their recourses together) main reason for conglomerate mergers.

12. It researches, develops, and manufactures high-technology products in numerous areas, including HVAC, helicopters, aircraft engines, elevators and escalators, fire and security, building systems, and industrial products…. GE
Fortune 500 #4

13. Multinationals
World’s largest corporations that has manufacturing or service operation in a # of different countries.
They help facilitate the rapid spread of technology and provides global economic benefits
Can be conglomerates too
EX:
Costco : Japan, Taiwan, Australia, Canada, Mexico

14. Other organizations
Non-Profit Organization- operates like a business but does not seek financial gains for its owners.