Ch 8 Business Organizations

Warm-up 1982: Internet is first used 1989: Apple launched 1994: Yahoo.com 1996: Dell.com 2004: Facebook 2005: Youtube 2006: twitter 2009: bing ??? : whats next??? 1. Add 2 additional innovations 2. What do you think is next? 3. What resources does an entrepreneur need to start a new business? 4. What are the risks/rewards?

Chart your notes DescriptionExamples Ad+DisAd - Sole P Partner Corp MNC Franchise Co-op Non- profit

8.1 Sole Proprietorships A business organization is a company or firm, established to carry on commercial enterprise

SOLE proprietorship: is owned and managed by a single individual.  Disadvantages: Unlimited personal liability Limited access to resources Lack of permanence  Advantages: simple to start Few regulations Sole receiver of profit Full control of company Easy to discontinue

8.2 Partnerships

A partnership is a business organization owned by two or more persons who agree on a specific division of responsibility and profit.

Types General partnership Limited partnership Limited liability partnership

Disadvantages  Unlimited liability  Potential for conflict Advantages  Ease of start-up  Shared decision making  Larger pool of capital (assets – money and other valuables)  Taxation – only on what you make – not on the business itself

8.3 Corporations, Mergers, and Multinationals

Corporations are legal entities, owned by individual stockholders, each of whom faces limited liability for the firms debts. Stockholders own stock, a certificate of ownership in a corporation.

Types of Corporations Closely held – stock rarely traded, usually only a few people (often family members) own it. Publicly held – has as many shareholders who can buy or sell stock on the open market.

Advantages  Individual investors do not carry responsibility for the corporations actions. They lose only the amount of money they invested. Stockholders have flexibility in owning/selling  Corporations have more potential for growth, with the ability to raise money and purchase capital by selling shares.  Corporations can raise money by borrowing it – through bonds (formal contracts to repay borrowed money with fixed payments.

Disadvantages  Expenses and difficulty of start-up  Double taxation  Portential loss of control by the founders  More legal requirements and regulations

Corporate Combinations: Mergers Conglomerate  When firms buy and produce totally unrelated products. (this does not decrease competition so governments do not worry about these) Horizontal mergers  Two or more firms in the same market with the same good or service. Vertical mergers  Two or more firms involved in different stages of producing the same good or service.

Multinational Corporations MNCs are corporations that operate in more than one company at a time. Advantage  Provide jobs an products around the world.  Spread new technologies and production methods  Jobs usually help poorer nations increase standard of living.

Disadvantage  MNC influence culture and politics, low wages, poor working conditions

8.4 Other Organizations Business franchise are semi-independent businesses that pay feels to a parent company. In return, they have the exclusive right to sell a certain product or service in a given area. Parent companies are called franchisers. They develop the product and system.

Franchise Advantages  Management training and support  Standardized quality  National advertising programs  Financial assistance  Cerntralized buying power

Disadvantages  High fees and royalties  Strict operating standards  Purchasing restrictions  Limited product line

Cooperative Organizations A cooperative is a business owned and operated by a group of individuals for their shared benefit.  Consumer Co-ops Discount price clubs, health food stores, you may either have to work or pay membership  Service Co-ops Discounted insurance, banking, health care, Credit unions  Producer Co-ops Agricultural marketing helping members sell their products.

Non-profit Organizations Nonprofit function like a business but to don operate with the primary function being profits. They try to benefit society.  Red Cross, churches, YMCA, Habitat

Professional organizations Work to improve the image, working conditions and skill levels of people in particular occupations.  National Education Association, American Bar Association, AMA (american medical assoc)  Keep members up-to=date on new codes and industry trends.

Business Associations Promote interest of a city, state, or group

Trade Associations Non-profits that promote interests of particular industries

Labor Unions Organized group of workers whose aim is to improve working conditions, hours, wages, and fringe benefits.

Back to the Basics Take your initial plan OR start another… now tell me:  Why you are starting your business & what you hope to accomplish.  Facts about your industry  Problems or a need that your business will satisfy  Highlight unique features  Identify your customer  How will your business be profitable  Summarize the risks of starting & how you will address them  Identify the type of ownership

INVESTOR FUNDING 4=Absolutely, 3=mostly, 2=somewhat, 1=not at all Owners = knowledge Unique & help People will buy it Risks = addressed Confident prosper score $$$