Chapter 8
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Chapter 8. Business Organizations. Types of Organizations. Business Organization – establishment formed to carry on commercial enterprise Three Types Sole Proprietorship Partnerships Corporations. Sole Proprietorships. A business owned and managed by a single individual.

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Chapter 8

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Chapter 8

Chapter 8

Business Organizations


Types of organizations

Types of Organizations

  • Business Organization – establishment formed to carry on commercial enterprise

  • Three Types

    • Sole Proprietorship

    • Partnerships

    • Corporations


Sole proprietorships

Sole Proprietorships

  • A business owned and managed by a single individual


Advantages of sole proprietorships

Advantages of Sole Proprietorships

  • Easy to Start-Up

    • Very little paperwork and legal expense

    • Minimal requirements

      • Authorization – must obtain a business license

      • Site Permit – permission to use a building

      • Pick a business name


Advantages of sole proprietorships1

Advantages of Sole Proprietorships

  • Relatively Few Regulations

    • Sole proprietorships are the least regulated businesses

    • Major regulation is the city zoning laws – city determines what areas will accommodate each kind of building


Advantages of sole proprietorships2

Advantages of Sole Proprietorships

It’s all mine!

  • Sole Receiver of Profit

  • Full Control

  • Easy to Discontinue


Disadvantages of sole proprietorships

Disadvantages of Sole Proprietorships

  • Unlimited Personal Liability

  • Limited Access to Resources

  • Lack of Permanence

I’ve lost everything!


Partnerships

Partnerships

  • A business organization owned by two or more persons who agree on a specific division of responsibilities and profits


Three kinds of partnership

Three Kinds of Partnership

  • General Partnership – Equal share of responsibility and liability among partners

    • Usually doctors, lawyers, accountants


Three kinds of partnership1

Three Kinds of Partnership

  • Limited Partnership – one partner has unlimited personal liability, others contribute money

    • Could be any kind of business


Three kinds of partnership2

Three Kinds of Partnership

  • Limited Liability Partnership (LLP) – all partners are limited from personal liability

    • States must grant permission to be an LLP – usually for doctors, lawyers, and dentists


Advantages of partnerships

Advantages of Partnerships

  • Easy to Start

    • Articles of Partnership – legal agreement of how to share profits and losses


Advantages of partnerships1

Advantages of Partnerships

  • Easy to Start

    • Without articles of partnership, the business falls under the Uniform Partnership Act


Advantages of partnerships2

Advantages of Partnerships

  • Shared Decision Making and Specialization

  • Large Pool of Capital

  • Taxation – no special taxes on the business


Disadvantages of partnerships

Disadvantages of Partnerships

:-@!

;~[

  • Unlimited Liability (except with an LLP)

  • Potential for Conflict


Chapter 8

The Main Event

Sen. Arlen Specter vs.

Sen. Ted Kennedy


Corporations mergers multinationals

Corporations, Mergers, Multinationals

  • Large entity owned by individual stockholders who all share limited liability for the firm’s debts

    • Stock – also called shares – a portion of ownership in a corporation


Corporations

Corporations

  • Corporations are a separate legal entity from the stockholders who own it – so they’re taxed twice!


Two types of corporations

Two Types of Corporations

  • Closely-Held Corporations – majority of stock is passed down through the family


Two types of corporations1

Two Types of Corporations

  • Publicly Held Corporations – many shareholders buying stock on the open market


Corporate structure

Corporate Structure

Elect


Advantages of incorporation

Advantages of Incorporation

  • Advantages to the investor:

    • Limited liability

    • Shares are transferable


Advantages of incorporation1

Advantages of Incorporation

  • Advantages to the corporation

    • Higher potential for growth

    • Long lasting

    • Nearly unlimited capital

      • Selling bonds


Disadvantages of incorporation

Disadvantages of Incorporation

  • Difficulty and Expense of Start-Up

  • Double Taxation

  • Loss of Control

  • High Regulations


Combining corporations mergers

Combining Corporations - Mergers

  • Horizontal Mergers – join two or more firms competing in the same market

+


Combining corporations mergers1

Combining Corporations - Mergers

  • Vertical Mergers – join two or more firms involved in different stages of producing the same good

+


Combining corporations conglomerates

Combining Corporations - Conglomerates

  • Firms that buy other companies that produce totally unrelated goods


Multinationals

Multinationals

  • Corporations that operate in more than one country at a time

  • They must pay taxes and obey the laws of each country they operate in

  • Many have bigger budgets than the country they are in


Business franchises

Business Franchises

  • Semi-independent business that pays fees to a parent company


Business franchises1

Business Franchises

  • In return for the fees, the business gets exclusive rights to sell the parent company’s product in a certain area


Advantages of opening a franchise

Advantages of Opening a Franchise

  • Management Training

  • Standardized Quality

  • National Advertising Program

I’m the same everywhere!


Advantages of opening a franchise1

Advantages of Opening a Franchise

  • Financial Assistance

  • Centralized Buying Power – the parent company buys in bulk to save everyone money


Disadvantages of opening a franchise

Disadvantages of Opening a Franchise

  • High Franchising Fees – parent company gets a share of the profit called a royalty

  • Strict Operating Standards


Disadvantages of opening a franchise1

Disadvantages of Opening a Franchise

  • Purchasing Restrictions

  • Limited Product Line


Cooperative organizations

Cooperative Organizations

  • A business organization owned and operated by a group of individuals for their shared benefit


Three kinds of co op s

Three Kinds of Co-op’s

  • Consumer Cooperatives – sell merchandise to members at reduced prices

    • Often require members to work or pay a membership fee


Three kinds of co op s1

Three Kinds of Co-op’s

  • Service Cooperatives – same as consumer co-op, but it provides a service

  • Producer Cooperatives – agricultural co-ops that help farmers sell their product


Nonprofit organizations

Nonprofit Organizations

  • Do not work for profit, but rather to help people

  • Exempt from income taxes


Nonprofit organizations1

Nonprofit Organizations

  • Professional Organizations – improve the image, working condition, and skill level of people in a profession

  • Business Association – promote the business interests of a geographical area (like a city or a state)


Nonprofit organizations2

Nonprofit Organizations

  • Trade Associations – promote the interest of an industry

  • Labor Unions – organized group of workers that aim to improve conditions, hours, and wages


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