Activator – Chapter 8 Write 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. Job Employer 1. 2. 3.

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

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.

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

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

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

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

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

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

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

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

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)

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

Denied Mergers

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

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

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.

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

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

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

Forms of Business Organizations Description Advantages Disadvantages Sole Proprietorship Partnership 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

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

Business Organization Advantages Disadvantages Sole Proprietorship 6 Partnerships 3 Corporations 5 4 Franchise (pg. 201-202) Multinational (pg. 200) 1

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

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)

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

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

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?

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

Essential Question #1 Essential Question #2 How do the 3 business organizations differ? A sole proprietorship is owned and operated by ___________________ Partnerships are owned by _______________ Corporations are owned by ___________________ one person 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