Transcript Types of Business Organization - PBworks

Sole
Proprietorship
TYPES OF BUSINESS
ORGANIZATION
Partnerships
(Limited/Gen)
Corporations
Non-profits
SOLE PROPRIETORSHIP- 72% OF
BUSINESSES
Advantages of sole
proprietorships
Economic Weakness of sole
proprietorshi p :
 U n l i m i t e d L i a b i l i t y : yo u h ave t o t a l
 Ease of start up
 Ease of Management
 You keep all profits
 You do not have to pay any
business taxes
 P s y c h ol og i c a l a d v a n t a g e s
 Ease of exit
r e s p o ns i b i l i ty fo r a l l d e b t s a n d
l i a b i l i t i e s o f t h e c o m p a ny
 Difficulty in raising financial
capital
 Limited size and efficiency
 Limited managerial experience
 Limited Life
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
9% OF BUSINESSES
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
PARTNERSHIPS
Ad van t ages o f P a r t ne r s hips :
D i sa d van t ag es o f P a r t n e r sh i ps
 E a se o f e st a b l ish men t
 U n l i m it ed l i a b ilit y

E a se o f M a n a g em en t : e a c h
 L i m i te d p a r t n e r i s o n l y
p a r t ner h a s d i fferent t hings t o
re s p o ns ible fo r h i s i n i tial
o ffer
i nve s tm ent. H e h a s l i m ited
 No sp e c i a l b u si n e ss t a x e s
l i ability.
 E a si e r t o r a i se f i n a n c ial c a p i t al
 L i m i te d L i f e
 L a r g e r t h a n so l e p r o p r i e to rsh ip
 C o n f l i ct b e t w een p a r t ners
 E a si e r t o a t t r a c t q u a l i fie d
w o r ke r s
WHAT FITS BEST WITH EACH
BUSINESS??? TELL ME WHY!!!
CORPORATIONS- 20% OF BUSINESS 74%PROFITS
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.
STOCK
CORPORATION- OWNERSHIP
 Common Stock is a basic share of owner ship 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 owner ship
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
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
 Disadva nta g es of a
corpora tion:
 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
DARE TO COMPARE
 Using the interwoven circles list the similarities and
dif ferences between Sole Proprietorships, Partnerships, and
Corporations
NON-PROFITS: WE DON’T LIKE
$$$ WE JUST WANT TO MAKE YOU
WHO IS HERE TO HELP???
 C o m m u n i t y a n d C i v i c o r g a n i z a t i on s
 Cooperatives- REI
 Consumer- Sam’s Club
 L a b o r , P r o f e s s i o n a l a n d B u s i n e s s O r g a n i z a t io n s
 L a b o r U n i o n s - o r g a n i z a t i o n o f w o r ke r s fo r m e d t o r e p r e s e nt i t s m e m b e r ’s
i n t e re s t s i n va r y i n g e m p l o y me nt m a t t e r s. C o l l e c t i v e b a r g a i n i n g
 P r o f e s s i o n a l A s s o c i a t i o n s - a g r o u p o f p e o p l e i n a s p e c i a l i ze d f i e l d t h a t w o r k
t o i m p r o ve t h e i r w o r k i ng c o n d i t i o ns.
 B u s i n e s s a s s o c i a t i on s
C h a m b e r o f C o m m e r c e - p r o m o t e e c o no m i c g r o w t h o f t h e c o m m u ni ty
B e t t e r B u s i n e s s B u r e a u - c o p s fo r b u s i ne s se s
MERGERS AND ACQUISITIONS
 5 Reasons to merge- Make money faster, Increase ef ficiency,
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 dif ferent
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
 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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2
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SUMMARY
 With a partner:
 Use two real organizations and design the following:
 A vertical merger
 A horizontal merger
 Conglomerate