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Types of Business Organization. Sole Proprietorship Partnerships (Limited/Gen) Corporations Non-profits . Sole Proprietorship- 72% of businesses. Economic Weakness of sole proprietorship : Unlimited Liability : you have total responsibility for all debts and liabilities of the company

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types of business organization
Types of Business Organization

Sole Proprietorship

Partnerships (Limited/Gen)

Corporations

Non-profits

slide3

Economic Weakness of sole proprietorship:

  • Unlimited Liability: you have total responsibility for all debts and liabilities of the company
  • Difficulty in raising financial capital
  • Limited size and efficiency
  • Limited managerial experience
  • Limited Life

Advantages of sole proprietorships

  • Ease of start up
  • Ease of Management
  • You keep all profits
  • You do not have to pay any business taxes
  • Psychological advantages
  • Ease of exit
stop and think
Stop and Think
  • If you started your own business what would it be?
  • What are some of the 4 Factors of production you would need.
    • 2 examples for each

Land

Labor

Entrepreneur

Capital

partnerships
Partnerships

Two major types of partnerships:

  • General Partnership: (most common type) all partners are responsible for management and the financial responsibilities of the partnership.
  • Limited Partnership: at least one partner is not active in the day to day running of the business. They have limited liability.

Articles of Partnership: contract between partners spelling out the rules of partnership.

Dividing profit

Dividing responsibility

Admitting new partners

Buying out partners

partnerships7
Partnerships

Disadvantages of Partnerships

  • Unlimited liability
  • Limited partner is only responsible for his initial investment. He has limited liability.
  • Limited Life
  • Conflictbetween partners

Advantages of Partnerships:

  • Ease of establishment
  • Ease of Management: each partner has different things to offer
  • No special business taxes
  • Easier to raise financial capital
  • Larger than sole proprietorship
  • Easier to attract qualified workers
corporation set up
Corporation- Set up
  • Incorporate: to form a corporation.
  • Charter: a document granted by the state giving a corporation the right to do business
  • Stock: shares of ownership in the corporation
  • Stockholders (shareholders): owners of stock.

Reasons to own stock:

Dividends: share of corporate profits paid to stockholders

Speculation: buy in hope that price of stock will increase.

corporation ownership
Corporation- Ownership
  • Common Stock is a basic share of ownership in a corporation
  • Have voting rights in the management of the company
  • In reality they turn over voting rights to someone else with a proxy: giving someone else the right to vote your share of stock.
  • Preferred Stock:

Non voting shares of ownership

Guaranteed dividend

Liquidation benefit: If corporation goes out of business they are ahead of common stockholders in getting back money.

  • Board of Directors: duty to direct the corporations business by setting board policies and goals

Elected by common stockholders

  • Hires a professional management team to run day to day activities. (CEO, CFO….)
corporations
Corporations
  • Disadvantages of a corporation:
  • Start up expenses are high.
  • Stockholders (owners) have a limited
  • Profits are taxed
  • Corporations are subject to more government regulations than sole proprietors or partners

Advantages of a corporation:

  • Ease of raising financial capital (main advantage)
    • Selling stock to investors
    • Selling bonds: a written promise to repay a loan on a specific date
    • Principal: the amount borrowed
    • Interest: the price paid for the use of another’s money
    • Borrowing money from banks.
  • Ability to hire
  • Limited liability
  • Unlimited life
  • Ease of transferring ownership:. Buying and selling stock is easy and is done millions of times a day
dare to compare
Dare to Compare
  • Using the interwoven circles list the similarities and differences between Sole Proprietorships, Partnerships, and Corporations
who is here to help
Who is here to help???
  • Community and Civic organizations
    • Cooperatives- REI
    • Consumer- Sam’s Club
  • Labor, Professional and Business Organizations
  • Labor Unions- organization of workers formed to represent its member’s interests in varying employment matters. Collective bargaining
  • Professional Associations- a group of people in a specialized field that work to improve their working conditions.
  • Business associations

Chamber of Commerce-promote economic growth of the community

Better Business Bureau- cops for businesses

mergers and acquisitions
Mergers and Acquisitions
  • 5 Reasons to merge- Make money faster, Increase efficiency, Acquire new product lines, Catch up or eliminate rivals, Lose a company identity.
  • Horizontal Merger-when two or more companies that product the same kind of product join forces.
  • Vertical merger- when two or more firms that are at different steps of manufacturing process join together.
  • Conglomerates-is a firm that has at least four businesses, each making unrelated products.
be a thinker not a stinker
Be a thinker not a stinker
  • With a neighbor develop 2 examples of each type of merger
    • Vertical
    • Horizontal
    • Conglomerate
    • Why would companies ever want to merge????

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summary
Summary
  • With a partner:
    • Use two real organizations and design the following:
      • A vertical merger
      • A horizontal merger
      • Conglomerate