ADDITIONAL BUSINESSES

S CORPORATION Hybrid small corporations Limited liability to share holders            Profits distributed to share holders taxed as personal income only

FRANCHISES License to operate a store individually (appears to be part of a chain)  Offers training Examples: McDonalds, Auntie Anne’s Pretzels, Subway                      

GOVERNMENT-OWNED CORPORATIONS Owned and operated by governments (federal, state, local)            Supplies a need not adequately met by the free market            Examples: Tennessee Valley Authority, U.S. Postal Service, Federal Deposit Insurance Corporation, Memphis Light, Gas, & Water

Nonprofit Organizations Works in a businesslike way to promote the collective interests of its members rather than seek financial gain for its owners They often rely on volunteers for much of its work. They perform useful services with minimal expense and without regard to earning a profit. Example – American Red Cross

Community Organizations Includes schools, churches, hospitals, welfare groups, and adoption agencies They are legally incorporated to take advantage of unlimited life and limited liability. Do not issue stock, pay dividends, or pay income taxes. Surpluses are used to further their work.

Cooperatives A type of nonprofit; voluntary association formed to carry on some kind of economic activity that will benefit its members Consumer co-ops – voluntary; buys bulk amounts of goods such as food or clothing on behalf of its members; members volunteer work to keep costs down (often done with food to help keep costs down; REI is nation’s largest; not Sam’s Club/Costco)

Cooperatives (continued) Service co-ops – provide services such as insurance, credit, or child care to its members, rather than goods (example – credit unions) Producer co-ops - help members promote or sell their products (most deal with farming; Ocean Spray cranberry co-op is an example; Farmers’ Alliance)

One more thing We mentioned there were 2 types of stock. Common Stock – gives the stockholder a percentage of profits (fluctuates year to year) and gives voting rights at the stockholder’s meeting Preferred stock – gives stockholders a guaranteed dividend/return every year (maximizes profits) and access to assets of business if it ever fails Companies issue an initial public offering as a way gain access to more money or pay off debts.

Mergers When 2 firms merge one business gives up its separate legal identity. Reasons for merging Grow faster Improve efficiency Acquire new/different products Eliminate a rival Change its image

Mergers Horizontal mergers - The merger of 2 businesses selling the same thing Vertical mergers – the merger of 2 different businesses or stage of manufacturing Conglomerate – firm with 4+ businesses making unrelated products Multinational – corporation producing and selling without regard to national boundaries