1. A business organization is an establishment formed to carry on commercial enterprise.

2. Today in Class Take out your foldable. Take out your foldable. Look over your study guide for unit 2 test – 10/22/15 Look over your study guide for unit 2 test – 10/22/15 Also, make sure you have a “Types of Businesses Graphic Organizer” Also, make sure you have a “Types of Businesses Graphic Organizer” Today – turn in foldable & Notes on Franchise Today – turn in foldable & Notes on Franchise

3. 1. Sole proprietorships 1. Sole proprietorships 2. Partnerships 2. Partnerships 3. Corporations 3. Corporations 4. Franchise 4. Franchise Types of Business Organizations

4. Sole Proprietorships (Business owned by one person.) Oldest and most common type of business organization Oldest and most common type of business organization

5. Advantages of Sole Proprietorships profits stay w/ owner profits stay w/ owner pride of ownership pride of ownership complete control complete control Easy to start little government regulation lower taxes

6. Disadvantages of Sole Proprietorships Unlimited liability limited life difficult to raise money risk of loss not shared Sole proprietorships have limited access to resources, such as physical capital. Human capital can also be limited, because no one knows everything.

7. Partnerships A business owned by two or more people. Examples: Lawyers, accountants, Examples: Lawyers, accountants,

8. Advantages of Partnerships Easy to start Easy to start little government regulation little government regulation not difficult to raise funds not difficult to raise funds combination of skills combination of skills

9. Disadvantages of Partnerships Unlimited liability Unlimited liability profits shared profits shared limited life limited life disagreements disagreements

10. Types of Partnerships Partnerships fall into three categories: General Partnership, General Partnership, where partners share equally in both responsibility and liability. where partners share equally in both responsibility and liability. Limited Partnership Limited Partnership where only one partner is required to be a general partner, or to have unlimited personal liability for the firm. where only one partner is required to be a general partner, or to have unlimited personal liability for the firm. Limited Liability Partnership Limited Liability Partnership A newer type of partnership where all partners are limited partners. A newer type of partnership where all partners are limited partners.

11. Corporations A corporation is a legal entity, or being, owned by individual stockholders. Treated as an individual by government To start a corporation, you must file for a state license, known as a certificate of incorporation. Corporations sell shares of stock (ownership) to raise money for the business.

12. Advantages of a corporation Easy to raise money Easy to raise money limited liability limited liability specialized management specialized management unlimited life unlimited life risks are shared risks are shared

13. Disadvantages of Incorporation Difficult to start Difficult to start limited activities limited activities less direct control less direct control government regulated government regulated double taxation double taxation

14. A business franchise is a semi-independent business that pays fees to a parent company in return for the exclusive right to sell a certain product or service in a given area. Business Franchises Franchisers develop products and business systems, then local franchise owners help to produce and sell those products. Franchisers develop products and business systems, then local franchise owners help to produce and sell those products. Franchises allow owners a degree of control, as well as support from the parent company. Franchises allow owners a degree of control, as well as support from the parent company.

15. Advantages and Disadvantages of Business Franchises Advantages of Business Franchises Management training and support Management training and support Standardized quality Standardized quality National advertising programs National advertising programs Financial assistance Financial assistance Centralized buying power Centralized buying power Disadvantages of Business Franchises High franchising fees and royalties Strict operating standards Purchasing restrictions Limited product line

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17. A cooperative is a business organization owned and operated by a group of individuals for their shared benefit. Cooperatives Consumer/Service Cooperatives Consumer/Service Cooperatives Retail outlets owned and operated by consumers are called consumer cooperatives, or purchasing cooperatives. Consumer cooperatives sell their goods to their members at reduced prices. Retail outlets owned and operated by consumers are called consumer cooperatives, or purchasing cooperatives. Consumer cooperatives sell their goods to their members at reduced prices.

18. Nonprofit Organizations Trade Associations Nonprofit organizations that promote the interests of particular industries are called trade associations. Labor Unions A labor union is an organized group of workers whose aim is to improve working conditions, hours, wages, and fringe benefits. Institutions that function like business organizations, but do not operate for profits are nonprofit organizations. Nonprofit organizations are exempt from federal income taxes.