Chapter 5  Business in the U.S. Economy  Forms of Business Ownership  Organizational Structure for Businesses

Objectives  Students will be able to:  Describe the changes that have occurred in U.S. Employment and changes in the types and numbers of businesses.  Identify and describe the forms of business ownership and outline the strengths and limitations of each.  Explain how to organize effective businesses and alternatives structures for businesses.

The Changing U.S. Job Market  Looking at your future, where do you see your self in 10 years?  1996 to 2006 total employment grew 14%  2007 = 144 million people held a job  2014 = Projected 165 million (increase 13%)

Employment Data  Baby Boomers ( )  Dominate labor market until 2010 (Retirement)  Avg. age will decrease from 2010 – 2014 (70 to 66%)

Pressure on Employees  Technology was designed to limit the amount of hours worked.  Technology has resulted in downsizing within our economy.  Personal and Professional Life  Less time with families  Added responsibilities at home and work.  Contingent Worker  Someone who has no explicit or implicit contract for long-term employment.

Business and The Economy  Size  19.5 million businesses (No Employees only the Owner)  4.5 million businesses ( Less than 20 employees)  26,000 businesses ( people)  107,000 businesses (100 or more people)  890 businesses (10,000 people)

Business and The Economy  Businesses:  Provide employment for millions of people.  Wages are used to purchase goods and services.  Profits earned pay owners and investors.  Government spending helps generate more agencies that improve our standard of living.  Help satisfy the consumers needs and wants.

Impact on a Community  How do businesses affect their surrounding community?  Creates Job  Helps pays for transportation, food, etc…  Stimulates a thriving community

Business Activities  Generating Ideas  For new products and services  To satisfy customers needs and wants  Raising Capital  To purchase capital resources  Create new jobs  Generate a successful business

Business Activities  Employing and Training Personnel  Businesses with no employees will grow and add parts to a business to make it run successfully.  Businesses have procedures for:  Recruiting  Training Employees  Newer Employee  New methods in performing job tasks

Business Activities  Buying Goods and Services  Purchase goods and services for their own personal use.  Purchase tangible and intangible goods:  Computer, Equipment, etc.. (tangible)  Advertising, Legal Advice, Accounting, etc… (intangible)  Marketing Goods and Services  Generating awareness for a companies goods and/or services.  Maintaining Business Records  Performance Tracker  Order and Payment Records

Types of Businesses  Producers  Create the products and services used by individuals and other businesses.  Intermediaries  Businesses involved in selling the goods and services of producers to consumers and other businesses.  Service Businesses  Carries out activities that are consumer by its customers.

Sole Proprietor  Business is owned and operated by one person.  Easiest form of business to start and end.  Pros:  Sole control over all business decisions.  You determine how profits are used.  Cons:  Owner is responsible for all debt.  Any asset (not businesses related) can be claimed to satisfy any outstanding debt.

Partnership  Business owned and controlled by two or more people who have entered into an agreement.  Similar to a Sole Proprietor  Both owners are responsible for key business decisions.  Each partner is liable for all the debts of the business if it should fail.

Corporation  Separate legal entity formed by documents filed with a state.  Owned by one or more shareholder and managed by a Board of Directors.  Meet all legal requirements.  Profits can not be accessed unless Board of Directors approve.  Unlimited Liability (Money invested will not be lost)

Bell Ringer….  What are three forms of ownership?  Proprietorship  Partnership  Corporation

Bell Ringer….  How do some of the business activities contribute towards our society?  Provide Jobs  Create wages to purchase goods/services  Creates transportation, food, clothing, etc…  Training for employees

Forms of Businesses  Businesses Ownership  Proprietorship  Partnership  Corporation

Choosing a Form of Ownership  Choosing a Sole Proprietorship  Owners choose this form of ownership for freedom of working by themselves. (Total Control)  Businesses formulated from hobbies or operate a business on a part-time basis.  Start-up is easy to do, must obtain:  Licenses  Permits  Financial Backing  Income is taxed as personal income (Expenses are paid out of your own pocket)  Any debt comes from the owner’s own personal assets.

Choosing a Form of Ownership  Choosing a Partnership:  Can be formed by a verbal or written agreement between two or more people.  The agreement will show how profits and loses will be divided among the partners.  Authority is based on amount invested in the business.  Very similar to a Sole Proprietorship AdvantagesDisadvantages Multiple InvestorsLimited Control Share IdeasNo Protection of Assets

Choosing a Form of Ownership  Choosing a Corporation  Popular forms of ownership for large businesses.  Corporations are subject to more laws and are more difficult to form than partnerships and proprietorships.  Treated as an individual by the government.  Follow the laws of the state in which they are organized.  Articles of incorporation  A written legal documents that defines ownership and operating procedures and conditions for the business

Choosing a Form of Ownership  Choosing a Corporation  Corporate Bylaws (Code of Ethics)  Formulate a Board of Directors (Decision Makers)  Selling and Purchasing of Stock (A form of ownership)  Pay corporate taxes on profits earned.  Investors also pay taxes on their earnings

Other Forms of Ownership  Specialized Partnerships and Corporations  Limited Liability Partnership  Identifies some investors who cannot lose more than the amount of their investment but they are not allowed to participate in day-to-day activities.  Joint Venture  Two or more businesses combine for a limited time for a specific job task.  S-Corporation  Income is passed through to the owners based on their investments and is taxed during their individual tax returns

Other Forms of Ownership  Specialized Partnerships and Corporations  Limited Liability Company (LLC)  Provided liability protection for owners.  No Articles of incorporation or bylaws are needed.  Nonprofit Corporations  A group of people who joint to do some activity that benefits the public.

Other Forms of Ownership  Cooperative and Franchises  Franchise  Written contract granting permissions to operate a business to sell products and services in a set way.  McDonald’s  Wendy’s  Taco Bell, KFC, Long John Silvers, A&W (Yum Brand)

Organizational Structure  Mission Statement:  Direction for a business in which it looks to achieve.  Short statement, written, and expresses why the business exists.  Goals:  Precise statement of results the business expects to have.  Policies and Procedures:  Guidelines and descriptions about how the business will be ran.

Identify Your Goals  Since a mission is a where the business can see themselves in the future. I want you to look at your own goals for the future.  On the index card, identify the following:  What is your goal for this school year?  Where do you see yourself in 5 years?  How do you plan to achieve those goals?

Principles of Effective Organization  Responsibility, Accountability, and Authority  Obligations  Rights to make decisions  Taking responsibility for the results achieved.  Unity of Command  There is a clear reporting relationship for all staff of a business.  Span of Control  Number of employees who are assigned to particular work task and manager.

Organizational Structure  Diagram that shows the structure of the organization, classifications of work and jobs, and the relationships amount those classifications

Organizational Structure  Functional Organizational Structure  Work is arranged within main business functions such as production, operations, marketing, and human resources.  Advantage:  Working with other who have the same job skills  Matrix Organizational Structure  Work is structured around specific projects, productions, or customer groups.