Transcript Business Organizations - Our Lady of Lourdes High School

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