Business Organizations - Our Lady of Lourdes High School
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Transcript Business Organizations - Our Lady of Lourdes High School
Business
Organizations
CH 8.1 Sole Proprietorships
Role of sole proprietorships
Advantages/Disadvantages
Sole Proprietorships
Most common form of business organizations
in the US - about 75%
Business owned and managed by a single
person
All the profits and debts
75% of businesses, but only about 6% of total
sales
0.9%
0.4%
9%
8%
Under 25K
25K-49,999
50K - 99,999
100K - 499,999
500K - 999,999
1,000,000+
69%
12%
Services
Finance, Insurance,
Real Estate
Retail
Size by $$
13%
Construction
48%
16%
Agriculture
Mining
Transportation
Manufacturing
Wholesale
Size by type
Advantages
Relatively easy to start up
A little paperwork and some legal expenses
Some minimum requirements
1.
2.
3.
Authorization - business license
Site permit
Register the name
Advantages
Few regulations
Least regulated form of business
Zoning Laws
Separate areas are designated for commercial and
residential uses
Owner gets all the profit
Full Control
Easy to get out of business
Cover debts and taxes
Disadvantages
Unlimited Personal Liability
Limited access to resources
Legal obligation to pay debts
Barriers to entry?
Physical/ Human Capital?
Lack of Permanence
Limited life expectancy?
Benefits to employees
Lack of experienced employees
Responsibility
Partnerships
CH 8.2
Business owned by two or more people
Specify division of profits and responsibilities
About 7% of all businesses in the US
5% of all sales in the US
-25K
25 - 49,999
50K - 99,999
100K - 499,999
500K - 999,999
1,000,000+
15%
9%
59%
8%
4%
4%
8%
18%
9%
54%
Agriculture
Mining
Construction
Manufacturing
Transpotation
Wholesale
Retail
I, RE, Fin.
Service
Types of Partnerships
General Partnership
Responsibilities and liability shared equally
Doctors, lawyers, construction companies
Limited Partnership
Liability falls on one person
More control to the general partner
Other partners only contribute $
Lose only investments
Types of Partnerships
Limited Liability Partnership (LLP)
Every partner is a limited partner
Exempts each of them from each other’s mistakes
Lawyers, Physicians, dentists, accountants
Advantages
Easy to start
No written agreement necessary
Articles of partnership
Spells out rights and responsibilities
Sharing of profits and losses
How new partners can join
Uniform Partnership Act
State law to establish rules for partnerships
Common ownership interests
Shared management responsibilities
Advantages
Profits are shared however the partnership
decides
Specialization
Skills brought to business
Larger pool of capital
No regulations
More people means more assets
Prestigious
Taxes
No taxes on business, just income generated
Disadvantages
Unlimited liability
Actions of one partner can jeopardize everyone
else
Pick partners carefully
LLP
Conflict
Goals, work habits, ethics, etc.
Communication
CH 8.3 Corporations, Mergers,
and Multinationals
Getting people to invest in your company is
another way to allow your company to grow
Corporations - the most complex of the
business orgs.
Legal entity owned by individual stock holders,
each of which has limited liability of debts
Stock (shares) represent the portion of ownership
Corporations
Different than SP’s
Defined as a separate entity
Must pay taxes
Makes contracts
Sues/ gets sued
20% of businesses in US
90% of all the products sold
$
19%
11%
31%
-25K
25 - 49,999
50 - 99,999
100 - 499,999
500 - 999,999
1,000,000+
23%
6%
10%
Type
34%
p.196
15%
17%
Agr
Mining
Constr
Manuf
Transp
Wholesale
Retail
Fin. I, RE
Services
2 Types of Corporations
Closely Held Corporations
Stock issued to only a few people
Usually family members, passed down
AKA - privately held corporations
Publicly Held Corporations
Many shareholders who buy and sell stock
Structure
Owners elect a board of directors
Directors make all the decision making
Appoints corporate officers that oversee
production
Officers hire managers, who hire employees
Advantages
Incorporation - forming of Corp. serves
interests of both individuals and the Company
Limited liability
Transferable ownership
Ability to attract capital
Longer life
Individual advantages
Limited Liability
No real responsibility
Invest your $ for a ROI, can’t lose more
Flexibility
Ability to sell your stocks and move on
Start losing money, not responsible for company debts
Advantages for Corporations
More potential for growth
Easier to raise $
Sell as much stock as charter will allow
Bonds - certificates sold that guarantee interest
Experts run business
Long Life
Stock is transferable
Can continue indefinitely
Disadvantages
Much harder to start up
More expensive
License - Certificate of Incorporation
(Corporate Charter)
Name
Statement of purpose
Length of time it will run
Founders’ names
HQ address
Method for fund raising
Rules for management
Disadvantages
Double Taxation
Seen as its own entity, taxed in addition to income
of individuals
Tax when shares are sold too
Loss of Control
More Regulation
Meetings for shareholders
File quarterly reports to Security Exchange
Commission (SEC)
Fed agency that regulates the stock market
Corporate Combinations
Three major types
Horizontal Merger - two or more in the same
market
Combinations
Vertical Mergers - joining of
different stages of production
Carnegie Steel
Combinations
Conglomerate - combination of companies
that have nothing to do with each other
No one part of the business earns
substantially more than the others
Multinationals (MNC’s)
HQ in one country with branches in others
Must follow laws of country they are operating in
as well as pay taxes
Some of the biggest have budgets larger than
Govt budgets
Advantages
Provide jobs worldwide
Spread technology
Improve standard of living
Disadvantages
Influence politics, culture
Low wages offered
Other Organizations
Business franchises
Semi independent
Pays fees to franchisers
Exclusive rights to sell products
Fast food, hotels,
CH 8.4
Advantages
Reputation
Training and support
Standardized quality
Nationalized advertising
Financial assistance
Centralized buying power
Bulk saving passed on
Disadvantages
High fees/ royalties
Strict standards
Purchasing restrictions
Hours, dress codes, procedures
Must buy from certain approved suppliers
Limited product line
Cooperatives
Owned and operated by a group of
individuals for their shared benefit
Three categories
Consumer Co-ops
Service Co-ops
Housing, Colombia House
Credit unions
Producer Co-ops
Agriculture/ sell crops for you
Nonprofit Orgs.
Usually work to benefit society some how
Museums, Public Schools, Red Cross,
Salvation Army, hospitals, churches
No income tax
Almost all provide a service rather than a
good
Nonprofit Orgs.
Some provide services to specific groups
Professional orgs - improve work conditions,
image, skills
American Bar Association - lawyers
American Medical Association - doctors
Business Associations - promotes business
interests in a particular area
Trade Associations
Chamber of Commerce, Better Business Bureau
Promote interests of particular industries
Labor Unions