Business Organizations and Market Structure

1. Business Organizations and Market Structure Unit 2: Microeconomics This unit explains how to start a business, the different ways businesses are organized and investing options.

2. Explain the organization and role of business and analyze the four types of market structures in the U.S. economy. • a. Compare and contrast three forms of business organization—sole proprietorship, partnership, and corporation with regards to number of owners, liability, lifespan, decision-making, and taxation. SSEMI3: Business Organizations

3. Small Business Administration - Government help for business and loans. Small Business Incubator-management advice, lower rents, job creation Internet-search for competition, on-line business help. Where to get business help

4. Elements of a Business Operation • Expenses - spend $ to make $ • Inventory - what you sell • Receipts- $ from customers • Advertising - promote your business • Recordkeeping - profit/loss statements, income statements, payroll, balance sheets • Risk - no guarantee of success

5. An Economic institution uses the factors of production to satisfy consumer wants and needs. Profit seeking enterprise that links scarce resources and consumer wants and needs. Forms of Business Organizations

6. Liability = refers to responsibility for paying debts of business • Unlimited liability = if business is unable to meet financial obligations, owners of business personally responsible • Limited liability = responsibility for debts restricted to ownership stake (shares of stock) of business owner • Lifespan = what happens to business when owner leaves/dies • Limited life = business closing or reorganizing and opening under new owners • Unlimited life = business passes to new owners through sale of shares without ending the business • Decision Making = entity responsible for day to day operating decisions of business Terms to Know

7. Four Kinds of Business Organizations • Sole proprietorship • Partnership • General • Limited • Joint venture • Corporation • Franchise

8. Sole Proprietorship • Normally run by 1 person. • You take all risks and rewards • Obtain licenses, permits, location and inventory • Proprietor is from Latin meaning “property” • Most numerous form of business in the USA. • There are more than 17 million which account for over 73% of all businesses in the USA.

10. Sole Proprietorship

11. Formed by drawing up a legal document called the partnership agreement. This document defines duties, pay, investment, profit sharing, etc. Partnerships are 7.1% of all businesses in the USA. Partnership

12. Assumed - Name Statute • A law requiring persons to make a public filing of their identities if their partnership operates under a name that does not reveal the owner’s identity.

13. General - both partners are involved in the day to day operations. Limited - one partner may be a “silent partner” Joint venture - partnership formed for a short period of time then dissolved. Types of Partnerships

14. Partnership • Avoid partnerships with friends and family. • Partnerships are like a marriage, some work and some don’t.

16. Partnership

17. Coca Cola • “A billion hours ago, human life appeared on earth. A billion Coca-Colas ago was yesterday morning. --Roberto Goizueta, CEO 1981-97.

18. A business that can own property, pay taxes, make contracts, sue and be sued. • Registering a corporation • Articles of incorporation - a legal document filed in the state where the corporation operates. • Corporate charter-granted by the state. • Each corporation must have a unique name. What is a Corporation?

19. Corporations 19.9% of all businesses in the USA are corporations. Generate 88% of all business revenue. Corporations can issue stocks and bonds.

20. Levi’s Corporation • The design is so right it need never alter, a timeless classic of clothes. Adaptable, like any well-designed object you can wear them with almost anything. --The designer Margaret Howell gives her view on Levi Jeans.

21. Two kinds of stock: • Common and preferred • Stock represents ownership in the company • Dividends can be earned based on stock ownership • Bonds – • Bond owners loan money to the company, and will be repaid when the bond matures. Stocks and bonds

22. The Board of Directors is responsible for supervision and controlling the corporation. The Board does not run the business on a day to day basis. Instead it hires officers for the company, President, VP, etc. who run the business and hire other employees. Corporate Structure

23. Corporate structure Stockholders elect the Board of Directors select the CEO

24. Corporations • Articles of incorporation must be filed with the state. • Each corporation must have a unique name within the state they are incorporated. • LLC-Limited Liability Corporation-has characteristics of a partnership and corporation as the owners are limited in liability to their capital contributions • S-corporations are small corporations

25. IBM • IBM under Thomas Watson Snr imposed a rigorous dress code on employees: blue suits, white shirts and ties. • Beards were prohibited until 1945, when the bearded Herbert Grosch was taken on as IBM’s second scientist. • How times have changed

27. Corporation

28. Corporations • Publicly held businesses have hundreds or thousands of owners who exchange their ownership on public exchanges. • Answering to shareholders.

29. Franchises • A franchise is the right to use a business name and sell their product. • A franchise fee is money paid to the parent company for those rights.

30. So you would like a franchise?