Bell Ringer

1. Bell Ringer Which of the following lists includes allof the U.S. market structures? • Monopoly, Oligopoly, Imperfect Competition, Perfect Competition • Perfect Competition, Monopolistic Competition, Monopoly, Oligopoly • Oligopoly, Monopolistic Competition, Monopoly, Economies of Scale • Economies of Scale, Natural Monopoly, Monopolistic Competition, Monopoly

2. Bell Ringer February 13th Think about all the different stores in Jackson. There are many types including restaurants, clothing stores, hobby stores, supply stores, general stores, and money saving stores. Are all the stores in Jackson structured the same (owned/created the same way)? If yes, how are they structured? If not, how do they differ? Brainstorm two examples that demonstrate your above answers.

3. Bell Ringer February 13th What is the term? Clues: • This term is on the word wall. • This term has seven syllables. • It is made of two words. • This term is an establishment of selling products to consumers. • This term has multiple types within it.

4. Business Organizations Chapter 8

5. Sole Proprietorships Section 1

6. Learning Objectives • Explain the characteristics of sole proprietorships. • Analyze the advantages of a sole proprietorship. • Analyze the disadvantages of a sole proprietorship.

7. Agree/Disagree - Write it down • Sole proprietorships can only be owned by one person. • Sole proprietorships make up only 15% of all businesses in the United States. • You have to get a business degree in order to start your own business. • Most sole proprietorships fail due to lack of freedom to do what the owner wants with the business.

8. Sole Proprietorship • Business Organization – an establishment formed to carry on commercial enterprise • Sole Proprietorship – a business owned and managed by a single individual • 75% of ALL businesses • 6% of all U.S. sales

9. Advantages of Sole Proprietorships • Easy to Establish & Start-up (inexpensive) • Few Regulations • Appropriate codes related to business • ex. health codes (food) • Zoning laws may prohibit out-of-house businesses • Keep ALL profits • Doesn’t have to share with stockholders or pay special taxes • Complete Control • Run it how they want to…no one else has a vote • Easy to Discontinue

10. Disadvantages of Sole Proprietorships • Unlimited Personal Liability • Liability – legal obligation to pay debts • If the business fails, owner may have to sell property to cover any debt and obligations • Ex. If you take out a loan for a piece of needed equipment, you still have to pay the loan back no matter what • Limited Access to Resources • Everything comes out of you own pocket/savings • May not have all the training to run every aspect of business • Ex. Really good at cutting grass, but not so good at keep track of bills/taxes/loans/profit (paperwork in general)

11. Disadvantages of Sole Proprietorships • Lack of Permanence • Cannot depend on someone else to maintain business • Ex. If the owner dies, retires, looses interest, gets sick, or moves – the business ceases to exist • Short-term Employees • Employees are hard to keep because there is a lack of security and/or advancement • Lack of fringe benefits • Fringe Benefits – payment other than wages or salary Ex. Paid vacation, retirement payments, health insurance, etc.

12. Recap Create a comparable chart. Using your notes and a partner, fill in this chart for each type of business that we discuss. CAN BE USED ON YOUR TEST!

13. Bell Ringer February 14th • If you started your own business, would you do it by yourself or get a partner to help? Why? • What kind of business would you start? Why?

14. Agree/Disagree - Write it down • Sole proprietorships can only be owned by one person. • Sole proprietorships make up only 15% of all businesses in the United States. • You have to get a business degree in order to start your own business. • Most sole proprietorships fail due to lack of freedom to do what the owner wants with the business.

15. Agree/Disagree • Partnerships can have more than two people in them. • There are multiple types of partnerships. • All partners share responsibilities equally no matter what. • Partnerships have to pay special taxes that other businesses don’t have to pay.

16. Partnership Section 2

17. Learning Objectives • Compare & contrast the different types of partnerships • Analyze the advantages of partnerships • Analyze the disadvantages of partnerships

18. Partnership • What is it? • Business organization owned by two or more persons who agree on a specific division of responsibilities and profits • Three Types • General Partnership – Doctors, Accountants, Lawyers • Partners share equally in both responsibility & liability • Limited Partnership • Only one partner is required to be a general partner • One (or more) person(s) invests money while the other runs it • Limited Liability Partnership – Attorneys, Physicians, Dentists • All partners are limited partners (only invest)

19. Advantages of Partnerships • Ease of Start-up • Articles of partnership legalize responsibilities & rights • Shared Decision Making & Specialization • Split responsibilities, strengths, & skills • Larger Pool of Capital • More physical & human capital (money & skills) • More advantages to employees • Room for advancement (Lawyers can become partners eventually) • Taxation • No special taxes on business, just taxation on income (profits)

20. Disadvantages of Partnerships • Unlimited Liability (excludes LLP) • General partners could lose everything • One partner’s actions affect all partners • Limited partners only lose initial investment • Potential for Conflict • Partnership agreements address technical & legal aspects • Partners must communicate openly & resolve conflicts

21. Recap

22. Assignment – Use same paper • Complete #1-8 on page 193 • Read Page 189 • Answer #1-3 • Closing • Describe one advantage & disadvantage of a partnership.

23. Corporations Section 3

24. Corporations • What is it? • Legal entity, or being, owned by individual stockholders • Stock – certificate of ownership in a corporation • Dividends – portion of profits paid out to stockholders • Entity • Identity separate from that of its owners’ identities • Regarded as an individual for legal purposes • Pays taxes, engages in business, makes contracts, sues and gets sued

25. Corporations • 20% of all U.S. Businesses • Sell 90% of all U.S. products • Generate 70% of all U.S. net income earned

26. Corporations • Types • Closely Held Corporations (Private) • Stock is sold to few people (family members) which is rarely sold but passed on within families • Publicly Held Corporations • Stock is sold on an open market to anyone

27. Corporation Structure

28. Advantages • Limited Liability for Owners (stockholders) • Can only lose the amount of money invested – no more • Transferable Ownership • Sell their stocks whenever they want to in order to get their investment back

29. Advantages • Ability to attract Capital • Selling stocks raises money to buy more capital • Selling bonds • formal contract to repay borrowed money plus interest • Long Life • Business doesn’t end when owners die because it’s transferable

30. Disadvantages • Expensive & difficult to start • Certificate of incorporation – need legal counsel • Double Taxation • Corporations pay taxes on their income/profit • Stockholders/owners pay taxes on their income/profit

31. Disadvantages • Potential Loss of Control by Founders • More Regulations & Legal Requirements • Annual meetings, Keep records of everything, Quarterly & Annual Reports to Securities & Exchange Commission (SEC)

32. Mergers – More Efficient Corporations • Horizontal Merger • Joining two or more businesses in the same market • Could result in a monopoly • Ex: Chrysler & Daimler Benz merged into DaimlerChrysler • Vertical Merger • Joining two or more businesses in different stages of producing the same good or service • Ex: Iron Ore Manufacturing, Steel Mill, Ship Manufacturing join into one company. Everything to make a ship is now in one firm. • Conglomerates • Joining more than three businesses that make completely different products or services • Ex: Procter & Gamble – Downy, Cascade, Old Spice, Oral-B, Puma, Iams, Tide, Pringles, Luvs, Pepto-Bismol, Puffs, Vicks, Gillette

33. Recap

34. Bell Ringer Name the three different ways to combine a corporation and describe how they are different. Please, use complete sentences.

35. Other Organizations Section 4

36. Business Franchises • What is it? • A semi-independent business that pays fees to a parent company (franchisers) in return for the exclusive right to sell a certain product or service in a given area. • Examples: • Fast Food Chains – McDonald’s, Burger King, Sonic, Wendy’s • Restaurants – Chili’s, Olive Garden, Cheddar’s, TGIF’s • Mall Stores – Kay Jeweler’s, Aeropostale, Sunglass Hut • Gas Stations – BP, Shell, Love’s Truck Stop

37. Advantages of Franchises • Built-in Reputation • Management Training and Support • Allows inexperienced owners to be successful • Standardized Quality • Follow certain rules/guidelines & provide certain products • National Advertising Program • National campaigns paid by franchisers • Financial Assistance • Some franchisers provide loans to start business • Centralized Buying Power • Franchisers buy products in bulk and pass on savings

38. Disadvantages of Franchises • Franchise Owner Sacrifices Some Freedom • Must follow franchiser’s guidelines • High Franchising Fees & Royalties • Franchisers charge high fees for the right to use their name • Franchisers charge franchises for part of profits (royalties) • Strict Operating Standards • Includes: hours of operation, dress codes, operating procedures • Purchasing Restrictions • Must buy products & supplies from the franchiser • Limited Product Line • Only offer products approved by franchiser

39. Nonprofit Organizations • Institution that functions much like a business in order to benefit society, but does not operate for the purpose of generating profits • Operate with partial government support • Exempt from income taxes • Usually provide services rather than goods • Types • Professional Organizations – NEA & American Medical Association • Business Associations – Better Business Bureau • Trade Associations – American Marketing Association • Labor Unions

40. Recap

41. Bell Ringer In a publicly held corporation • Stockholders rarely trade their stocks • A large number of stockholders can buy and sell stock • Stocks are not usually traded with the public • Family members are excluded from holding stock

42. Bell Ringer If a limited partnership fails, who is personally liable for the debts? • Anyone who works for the partnership • All of the partners • Only the general partner • Only the limited partner