Chapter 8 - Business Organizations

1. Activator – Chapter 8Write down three occupations that you’re considering for your future. Categorize each of your choices based on who your employer might be for each job.

2. Chapter 8 - Business Organizations • Business organization (firm) – establishment formed to bring goods and services to the market • 3 types – 1) Sole proprietorship, 2) Partnership, 3)Corporation • How do they differ? • Each has different structures and levels of liability (responsibility) • Liability – legal obligation to pay debts/injury settlements incurred by the business • Each are engaged in bringing goods, services, or both to consumers in the market

3. Sole Proprietor • Sole proprietorship – a business owned by one person • Most common type of business organization • 75% of all businesses are sole proprietorships in the U.S.

8. Partnership • Partnership – a business organization owned by two people who agree to split responsibilities and profits • Account for about 5 % of all businesses

9. Partnership • General Partnership – partners share profits, liability and responsibility • Fast food, lawyers, bars, small businesses • Both workers are actively involved in the company

10. Partnership • Limited Partnership – all partners are limited from personal liability, in the case of another partners mistakes. • Legal buffer for one partner from personal liability

11. Partnership • Articles of Partnership – outline the type of partnership, to the state, between partners.

12. Corporation • Corporation – is a separate legal entity, or legal being, owned by individual shareholders, each of whom faces limited liability for the firms debt • Shareholders face no liability for the firm’s obligations • Considered is considered a separate legal entity • Account for 20% of all businesses, but 90% of all products sold

18. Corporation • Stock – a certificate of ownership in a corporation • Partial owner , i.e. 1000 shares, purchase 1, 1/1000th owner of the company • Closely held – privately held corporations, that do not trade stock on the public exchange • Publicly held – sells stock on the market to investors in order to grow the business

19. Google Videos • http://www.youtube.com/watch?v=z8wqS7VkAcw&list=PL259C0982150A872C&index=9 • http://www.youtube.com/watch?v=-BdylWGczho • http://www.youtube.com/watch?v=yIMNQT-NDoc

20. Mergers • Merger – combine with another company to become one entity • Horizontal merger – firms in the same market with a similar good or service merge • Half and Ebay • Facebook and Instagram • American Airlines and US Airways

21. Mergers • Vertical merger – firms join two or more firms involved in different stages of producing the same good • Control all phases of the product from production to sales (monopoly)

22. Luxxotica • http://www.youtube.com/watch?v=voUiWOGv8ec&list=PL368E5C375FD706A9&index=2

24. Denied Mergers

25. Mergers • Conglomerates – business mergers with large companies, more than three businesses

26. Multinationals • Multinationals – large corporation that produces and sells its goods and services throughout the world

27. Other Organizations • Business Franchise – semi-independent business that pays fees and royalties to a parent company • Business is granted right to sell using the name, product and brand of the company • Zaxbys, McDonalds, Subway, etc.

28. Other Organizations • Cooperative – Co-0ps, business organization owned and operated by a group of individuals for their shared benefit

29. Other Organizations • Nonprofit Organizations – business that gears towards benefiting society (philanthropy)

30. Other Organizations • Labor Unions – organized group of workers whose aim is to improve working conditions, hours, wages and fringe benefits for its members.

32. Forms of Business Organizations • Most common form of business organization in the US • Owned/run by 1 person • Smallest in size Easy to start – take an idea and start the business Complete control Total profits Taxed once No boss Unlimited liability – personally responsible for all debts and business losses Difficult to raise money Difficulty in hiring workers Inexperience Lack of fringe benefits Limited life (s.p. dies, business dies) • Owned/run by 2 or more persons • Easy to start • 2 heads are better than 1 • Taxed once • Easy to borrow money • Easier to hire • Unlimited liability • Limited life • Potential for conflict

33. Forms of Business Organizations • Separate legal entity (person) Easy to raise money May sell stock Shareholders are independent Limited liability Unlimited life • Incorporate with the government • Offer stock More expensive to start Shareholders lose control of business Double taxation (taxed twice) More government regulation Royalties and fees to parent company Strict operating standards Buy from specific vendors Limited creativity with products Training of owners Quality products National advertising Financial assistance Bulk purchases bring down cost • Semi- independent business • Pays fees to a parent company (McDonalds)

35. Binder Check – Due Today • Business Organization Chart • Google Video Questions • Crossword Puzzle (7+8) • Study Guide (7+8) • Ch. 7+8 VIS Terms • Test Corrections-Standards Sheet • Daily Tens • Essential Questions • Chapter 7/8 - Notes

36. Study Guide Chapter 7 + 8 • Perfect/Pure competition • a) Many buyers and sellers, b) identical products, c) buyers + sellers are well informed, d) no barrier to entry. • Barrier to entry • Monopoly • Prices are not competitive, dictated by monopolist. • Patent • Government • License • Price discrimination • Market power • Monopolistic • a) Many buyers and sellers, b) product differentiation, c) low barrier to entry, d) some control over price • Perfect competition, products are identical. Monopolistic, products are similar but not identical (brand differentiation)

37. Study Guide Chapter 7 + 8 Closely held Publicly held Partnership Corporation Multinational Horizontal Vertical Conglomerate Franchise Cooperative • Oligopoly • Collusion, price fixing • Business Organization • Sole proprietor • Partnership • General • Limited liability • Articles of partnership • Corporation • Sole proprietorship • Corporation • Stock/share • Partnership • Sole Proprietorship/Partnership

38. Study Guide Chapter 7 + 8 • Perfect Competition/Oligopoly • Monopolistic Competition • Perfect • Perfect • Monopolistic • Monopoly • Monopolistic • Monopoly • Monopoly • Monopoly • Oligopoly • Monopolistic • Oligopoly • Oligopoly • Perfect

39. Extra Credit • List the 4 market structures in order from least competitive to most competitive. • What does it mean for a company to have market power?

40. Include on Paper • Name • Date (10-12) • Class Period • ID: A, B, C • Ch. 7+8 Test

41. Essential Question #1 one person • How do the 3 business organizations differ? • A sole proprietorship is owned and operated by ___________________ • Partnerships are owned by _______________ • Corporations are owned by ___________________ 2 or more people Essential Question #2 shareholders • 2. What are the characteristics of each market structure? • Perfect competition, products are ___________________, _____________ firms, consumers are _____________, ________________ barriers to entry. • Monopolistic competition, products are __________________, but not _________________, __________________ firms, __________________ barriers to entry. • Oligopoly, products are ________________ or _____________, and are controlled by ___________ firms. ____________ barriers to entry • Monopoly, ___________ product, controlled by ___________ firm, ______________ barriers to entry identical many informed no similar identical many low Identical similar a few high one one complete