2. Chapter 6.1 Types of Business Ownership
Describe the advantages and disadvantages of the three major forms of business organizations
Describe how cooperatives and nonprofits are like and unlike corporations and franchises

3. Key vocabulary Sole proprietorship Unlimited liability Partnership
Corporation
Limited liability
Cooperative
Nonprofit organization
Franchise

4. Business math Linda is investing for retirement 30 years from now.
She wants 70% of her money in stocks, 20% in bonds, and the remaining 10% in a money market fund.
Stocks now compromise 80% of her portfolio so she needs to rebalance her portfolio
If her portfolio is worth $100,000, what percent of her stock holding should she sell in order to rebalance her portfolio?
What is the value of the stocks, bonds, and money market accounts of the following portfolio?
The account is worth $187,000, it is divided into 45% stocks, 40% bonds, and 15% money market?

5. Organizing a Business The three main types of businesses are
Sole Proprietorship
Partnership
Corporations
The type of business is usually determined in the early stages of the business plan and the needs of the business

6. Sole proprietorships
¾ of all businesses in the US are classified as sole proprietorships
These are characterized as businesses being owned by one person
While accounting for almost ¾ of all businesses formed in the US, they only account for 5% of the total revenue generated by all businesses

7. Advantages to Sole Proprietorships
Easy to form
Maybe as simple as a license and a permit
Fully in charge of the business
You are the Man or Woman now and people work for you
You get to keep all profits
They will be reported as income on personal taxes
Lower taxes compared to corporations
Tax rate is determined by personal income bracket

8. Disadvantages to Sole Proprietorships
Unlimited Liability- the owner is personally responsible for the company’s debts
If you have more debt than income then the owner has to make up the difference
Limited access to credit
Credit worthiness is determined by personal credit score
Running out of money is why most small businesses fail
Lack of skills to run a business
Best baker in the world can’t balance the books
The company ends when the owner dies

9. Business math
The neighborhood bakery makes bread, cakes, cookies, and pies.
At the end of the day, the prices of all the leftover products are reduced by 75%.
If bread sells for $0.87 at the end of the day, what was its original price?

10. Partnerships
Is characterized as a business owned by two or more people who share in the risks and rewards of that business
Important to create a partnership agreement stating how profits, losses, and the work load will be divided

11. Advantages to Partnerships
Very easy to start
Partners may only need a license to start the business
Easier than Proprietorships to get capital
Usually more start-up capital with more partners
Banks are more willing to lend money to partnerships
Income is taxed on a personal level
More people= more skills and knowledge

12. Disadvantages to a Partnership
All partners share the same business risk
Partnership ends, when a partner leaves or when a new partner is added
Unlimited financial and legal liability among the partners

13. Critical Thinking
Why might two people decide to form a partnership instead of a sole proprietorship?
Working as a team member is similar to being in a partnership. What are some of the advantages and disadvantages of working with others?

14. Corporations
Is a company that is registered by a state and operates apart from its owners
To form a corporation, the owners/ managers must get a corporate charter from the state where their main office will be located.
A corporate charter is a license to run a corporation
To raise money, the business can issue stock
The company must have a board of directors

15. Advantages of a Corporation
Limited Liability for the firm’s owners, they are only responsible for the money they invested
Can raise large amounts of capital quickly by issuing stock
The business will not end if the owner/ CEO dies

16. Disadvantages of a Corporation
Double taxation
The corporation pays taxes on its income, and investors pay taxes on their dividends
S corporations do not have this feature but we will cover this later
More regulated by the government and international law
Difficult and very costly to start

17. Creating a database
In Excel, compile a database of at least 10 businesses from Gloucester county.
Include fields for the name, address, telephone number, and the category of business.
Find at least one business that is a producer, a processor, a manufacturer, an intermediary, and a retail or service business.

18. Other Ways to Organize a Business
Cooperative- a business owned and operated by its members
Small farms pooling their resources of buying and selling materials
Allows for cheaper advertising and costs in the long run
An example would be Ocean Spray
Nonprofit organization- a nonprofit that focuses on providing a service but not to make a profit
Must be registered with the government
No profit= no taxes
Franchise- contractual agreement to use the name and sell the products and services of a company in a designated geographic area
You have to invest money or pay franchise fees, or pay a portion of profits back to the organization

19. Review
What is the difference between a sole proprietorship and a partnership?
If a partner makes a bad decision, what responsibility do the other owners have?
Why are cooperatives formed?

20. Chapter 6.2: Types and Functions of Business
Differentiate the six types of business
Describe the five functions of business
Discuss how the five functions of business relate to each other

21. Key vocabulary Producer Processor Manufacturer Intermediary Wholesaler
Retailer
Production
Procurement
Marketing
Management
Finance
Accounting

22. Types of Businesses Producers- a business that gathers raw goods
Materials gathered in their original state from natural resources such as land or water
Agriculture, Mining, Fishing, and Forestry
Processors- changes raw materials into more finished products
Examples include- sugar cane, gasoline, and steel
Manufacturers- makes finished products out of processed goods
Examples include- cars, CDs, and computers

23. Intermediaries and Wholesalers
Intermediaries- a business that moves goods from one business to another.
It will buy the goods, store them and then resell them to another business
Wholesaler- a distributor of goods
A clothing wholesaler will buy thousands of jackets, then divide them into different stores in much smaller quantities to sell directly to consumers

24. Retail and Service Businesses
Retailer- purchases goods from a wholesaler and sells them to consumers.
Service stations, music stores, and auto dealers are examples
Service businesses perform a task.
Medical clinics, law firms, taxi companies, and copy shops
These types of businesses provide about 75% of all jobs

25. Function of Business The five main functions of business
Production and Procurement
Marketing
Management
Finance
Accounting

26. Production and Procurement
Production- the process of creating, expanding, manufacturing, and improving goods and services
Procurement- is the buying and reselling of goods that have already been produced

27. Marketing
The process of planning, pricing, promoting, selling and distributing ideas, goods, and services
Trying to convince some one to buy the product or try a service
Use market research and trends to figure out plan

28. Management
The process of achieving company goals by planning, organizing, leading, controlling and evaluating the effective use of resources

29. Finance and Accounting
Finance- the business or art of money management
Accounting- involves maintaining and checking records, handling bills, and preparing financial reports for a business.

30. Critical Thinking
Identify what happens during the production, processing, and delivery stages within each type of business responsible for a loaf of bread.
Explain how a producer, processor, and a manufacturer are not involved in producing a service.
How can accountants in a firm provide an idea of the general health of the company?

31. How the Functions of Business are Independent
The 5 functions of business are interdependent
Without one, the others would fall apart
If you focus too much on one area, the other areas could fail
If you cannot manage all 5, consider outsourcing one or more of the nonessential duties.

32. Science and tech trends
On page 102 of your textbook read the scenario
Go to the following links to assist you in your research
Create a PowerPoint presentation describing a person, invention, or time period that interests you.

33. Career opportunities
Go to the Occupational Outlook Handbook and search for “top executive” in the Ooh search/ A-Z index.
Write a one page report about the occupation and what you can do to prepare for this position in the future.

34. Review What is the difference between a producer and a processor?
Identify the 5 functions of business
Give an example of how the accounting and finance functions can affect a businesses' marketing and production processes.