Transcript Topic 4 business organizations and institutions

TOPIC 4 BUSINESS ORGANIZATIONS AND
INSTITUTIONS
Mr. Kallusingh
SOLE PROPRIETORSHIP
A business owned and operated by one person
 They are typically small in size and usually require
few qualifications
 Advantages- easy start up, easy management,
controls all profits, business is exempt from taxes,
your own boss, ease of leaving
 Disadvantages- unlimited liability, raising financial
capital, having enough capital for inventory and
labor, limited managerial experience, finding
qualified employees, limited life

CORPORATIONS
Make up 90 percent of all sales in America
 Is a separate legal entity that can buy/sell
property, enter contracts, and be sued
 Has shareholders that invest in the business
 Advantages- easily raise capital, professional
management, limited liability, unlimited life
 Disadvantages- difficulty of receiving a charter,
owners lake of control in day-to-day operations,
double taxation, more government regulation

PARTNERSHIPS
General- all partners are involved day-to-day
activities or Limited- at least one partner is not
involved in day-to-day activities
 Easy to start, can have paperwork to decide the
division of power
 Advantages- ease of establishment, maybe
ease of management due to multiple owners,
single taxation, easier to gain financial capital,
easier management due to size, can attract
employees due to specialization
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PARTNERSHIPS

Disadvantages- liable for partner decisions,
limited life, conflict amongst partners, all
people are liable for debts
LIMITED LIABILITY CORPORATIONS
Blends parts of corporations and partnerships
 Has the limited liability of corps and single tax
of partnerships
 Well suited for single owners that do not want
to have all the liability
 Advantages- tax choice, less paperwork than a
corporation, do not have to deal with investors
 Disadvantages- lack of government protection,
more difficult to raise capital, management
issues

MERGERS
Mergers take place to grow faster, become
more efficient, make a better product,
eliminate a rival, or change its image
 Horizontal Merger- two companies that make a
similar product join forces
 Vertical Merger- two companies that are
involved in different steps of manufacturing or
marketing merge; automaker and tire company
 Conglomerate- firm with at least four different
businesses making unrelated products
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BUSINESS ORGANIZATIONS
Non-Profit Organization- is a business that tries
to promote the interest of its members instead
of turning a profit
 Multi-National Organization- corporation that
has manufacturing or service operations in
different countries
 Franchises- the practice of one firm using
another’s successful business model

WAYS OF RAISING CAPITAL
Bond is a written promise to repay the amount
borrowed at a later date with interest
 Stock is like buying a portion of a company
 Common Stock- people owning this can vote on
board of directors
 Preferred Stock- people owning this can not
vote on board of directors, but get paid
dividends first
