1. Business Organizations Sole Proprietorship Partnership Corporation

3. Sole Proprietorship Business owned and run by one person/family

4. Sole Proprietorship Advantages: 1.Ease of starting up 2.Ease of managing 3.Keep all the profits

5. Sole Proprietorship Advantages: 4.No “business income taxes” to pay - Not a separate legal entity

6. Sole Proprietorship Advantages: 5.Personal satisfaction - you are your own boss

7. Sole Proprietorship Advantages: 6.Easy to get out of business - Pay up debts and stop offering goods or services

8. Sole Proprietorship Disadvantages: 1.Personal unlimited liability - Responsible for all losses and debts

9. Sole Proprietorship Disadvantages: 2.Hard to raise financial capital (money needed to start the business) - May have to use savings, credit cards, borrow from banks or friends/family

10. Sole Proprietorship Disadvantages: 3.Size and Efficiency - Need to hire enough people and stock enough inventory to be successful Inventory – stock of goods and parts in reserve

11. Sole Proprietorship Disadvantages: 4.Limited managerial experience - May need to hire people for that role

12. Sole Proprietorship Disadvantages: 5.Hard to attract qualified employees - Usually can’t offer benefits available with large companies

13. Sole Proprietorship Disadvantages: 6.Limited Life - Ends with failure, death, or when the business is sold

14. Partnerships Business that is jointly owned by two or more persons

15. Partnerships – Two Kinds General Partnership – all partners are responsible for management and finances of the business I sure hope he knows what he’s doing

16. Partnerships – Two Kinds Limited Partnership – at least one partner is not responsible for daily running of business

17. Partnerships - Formation Articles of Partnership - –Filed with the state –Explain how profits are divided up –Explain how new partners can join

18. Partnerships Advantages - 1.Ease of establishment Attorney fees Filing fees

19. Partnerships Advantages - 2.Ease of Management

20. Partnerships Advantages - 3.No special income tax to pay

21. Partnerships Advantages - 4.Easier to obtain financing and capital From banks From new (rich) partners

22. Partnerships Advantages - 5.Larger size = more efficient operations

23. Partnerships Advantages - 6.Can attract top talent to work

24. Partnerships Disadvantages - 1.Each partner is fully responsible for actions of all the partners Limited Liability – a partner’s liability is limited to the amount he/she has invested in the business

25. Partnerships Disadvantages - 2.Limited life – partnership ends if a partner dies or leaves

26. Partnerships Disadvantages - 3.Potential conflict between partners

27. Partnerships Disadvantages - 4.If the business fails, partners may have to file for bankruptcy Bankruptcy – permission granted by the court to stop or delay making payments on debt

28. Business Organizations Project In groups of 4, create a new business to manufacture and sell a unique product Must include: –Model of the product –Brochure to sell the product –Commercial to market the product –Description of the business organization (Major Grade)

29. Corporations A business recognized as a separate legal entity with all the rights of an individual Can: Buy and sell property Enter into contracts Sue and be sued

30. Corporations - Forming To become a corporation, you must: 1.request permission from federal or state government – receive a charter Charter – document from government granting permission to incorporate

31. Corporations - Forming To become a corporation, you must: 2.Issue stock to shareholders/ stockholders Stock – ownership certificates Shareholders/stockholders – investors in the business

32. Corporations - Forming To become a corporation, you may: 3.Issue dividends to shareholders/ stockholders dividend – a check for a portion of the corporate earnings (profit)

33. Corporations Advantages: 1.Ease of obtaining financial capital by: -Selling stock to investors –Issuing bonds bond – written promise to repay an amount at a later date principal– amount borrowed Interest – price paid for use of someone’s money

34. Corporations Advantages: 2.Can hire managers to run the business

35. Corporations Advantages: 3.Provide limited liability for its owners –Owners not responsible for the success of the business –Stockholders only lose the amount they invested

36. Corporations Advantages: 4.Unlimited life –Continues to exist even if ownership changes

37. Corporations Advantages: 5.Ease of transferring ownership –Shareholders can sell stock to someone else

38. Corporations Disadvantages: 1.Difficulty of getting a charter –Filing fees, legal fees

39. Corporations Disadvantages: 2.Shareholders have little say once they vote for the board of directors –Board allows the management team to run the business

40. Corporations Disadvantages: 3.Double taxation of corporate profits –Corporate profit is taxed –Personal income is taxed

41. Corporations Disadvantages: 4.Subject to government regulations –Registered with a state –Registered with the SEC –Keep public informed on profits and losses SEC (Securities & Exchange Commission) – regulates and supervises sale of stock

42. Taking a Loan Amount of Loan:$15,000 Interest on Loan:10% Length of Loan:5 yrs. Monthly Payment: $318.71 Total Paid for Loan:$19,122.60 1 st Payment: $193.71 (principal) –$125.00 (interest)

43. Business Growth Reinvestment – investment in new plant, equipment, and technologies Net income Net income – revenue minus expenses/taxes

44. Business Growth Reinvestment – investment in new plant, equipment, and technologies Depreciation Depreciation – general wear and tear on capital goods

45. Business Growth Reinvestment – investment in new plant, equipment, and technologies Cash flow Cash flow – net income plus depreciation (bottom line)

46. Where is business growth taking place on the chart?

47. Business Growth Mergers – combining two or more businesses to form a single firm The new company, ChevronTexaco (worth $45 billion), was formed October, 2001The new company, ChevronTexaco (worth $45 billion), was formed October, 2001 With 53,000 employeesWith 53,000 employees 7% (4,000 employees) lost their jobs 7% (4,000 employees) lost their jobs

48. Business Growth Why Merge? –To get bigger –To become more efficient –To eliminate rivals –To change identity

49. Business Growth Types of Mergers –Horizontal – two or more firms that make the same product join forces

50. Business Growth Types of Mergers –Vertical – firms involved in different steps in manufacturing join forces

51. Other Types of Corporations Conglomerate –Corporation with at least four businesses making unrelated products Were very popular in ’70s and early ’80s

52. Other Types of Corporations Multinational –Corporation with manufacturing or service operations in a number of different countries

53. Other Business Organizations Nonprofit Organizations –Promote the interests of the members, not the financial gain of their owners Credit Unions Labor Unions Professional Associations

54. Other Business Organizations Government’s Role –Direct role – distributes goods and services to customers –Indirect role – makes sure the markets operate smoothly