Types of Business Organization

1. Types of Business Organization Sole Proprietorship Partnerships (Limited/Gen) Corporations Non-profits

2. Sole Proprietorship- 72% of businesses

3. Economic Weakness of sole proprietorship: • Unlimited Liability: you have total responsibility for all debts and liabilities of the company • Difficulty in raising financial capital • Limited size and efficiency • Limited managerial experience • Limited Life Advantages of sole proprietorships • Ease of start up • Ease of Management • You keep all profits • You do not have to pay any business taxes • Psychological advantages • Ease of exit

4. 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 Capital

5. 9% of businesses

6. 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

7. Partnerships Disadvantages of Partnerships • Unlimited liability • Limited partner is only responsible for his initial investment. He has limited liability. • Limited Life • Conflictbetween partners Advantages of Partnerships: • Ease of establishment • Ease of Management: each partner has different things to offer • No special business taxes • Easier to raise financial capital • Larger than sole proprietorship • Easier to attract qualified workers

8. What fits best with each business??? Tell me Why!!!

9. Corporations- 20% of Business 74%-profits

10. 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.

11. Stock

12. Corporation- Ownership • Common Stock is a basic share of ownership 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 ownership 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….)

13. Corporations • Disadvantages of a corporation: • 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 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

14. Dare to Compare • Using the interwoven circles list the similarities and differences between Sole Proprietorships, Partnerships, and Corporations

15. Non-Profits: We don’t like $$$ we just want to make you

16. Who is here to help??? • Community and Civic organizations • Cooperatives- REI • Consumer- Sam’s Club • Labor, Professional and Business Organizations • Labor Unions- organization of workers formed to represent its member’s interests in varying employment matters. Collective bargaining • Professional Associations- a group of people in a specialized field that work to improve their working conditions. • Business associations Chamber of Commerce-promote economic growth of the community Better Business Bureau- cops for businesses

18. Mergers and Acquisitions • 5 Reasons to merge- Make money faster, Increase efficiency, 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 different steps of manufacturing process join together. • Conglomerates-is a firm that has at least four businesses, each making unrelated products.

19. 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???? 1 2 3 4 5

20. Summary • With a partner: • Use two real organizations and design the following: • A vertical merger • A horizontal merger • Conglomerate