 Types of Businesses Organizations Unit 7 Decision, Decisions

 A business organization is an establishment formed to carry on a commercial enterprise  Also called a company or a firm

Single or Sole Proprietorship  Business owned and managed by one person  Over 11 million in the U.S.  Most common type of organization  Examples:  Restaurants, gas stations, lawn care

Sole Proprietorship Advantages - Easy start-up (business licenses, site permit, name of business) - Sole receiver of profit - Full control of business - Easy to discontinue - Not subject to special business taxes Disadvantages - Unlimited personal liability o Liability is a legally bound obligation to pay debts. Sole proprietors are bound to all of their business debts - Limited access to resources - Limited life – business lack permanence beyond the life of the sole proprietor

Partnership  Business owned by 2 or more people  Examples:  Doctors, dentists, lawyers

Partnership Advantages - Easy start-up - Shared decision making - Specialization – each partner can bring his or her talents - Larger pool of assets – helpful when the business needs to borrow money - Not subject to special business taxes Disadvantages - Unlimited liability - Each general partner is bound to debt incurred and responsible for paying this debt - General partners do not have absolute control over their business - Potential for conflict

Corporations  Business that has a legal identity separate from the owners  Large business owned by stockholders  Stocks: shares of ownership in company  Stockholders: people who invest money in company in hopes of making a profit

Structure of a Corporation Board of Directors Officers Stockholders

Corporations Advantages - Limited liability for owners - Transferable ownership – owners can sell stock and get money in return - Long Life – business does not end with the death of the owners. - More potential for growth Disadvantages - Expensive and difficult to start up - Double taxes o Corporations pay taxes on income. o Stockholders receive dividends (profits paid out to stockholders) o Dividends are also taxed - Potential loss of control by the founders – Board of Directors usually run corporations. - More legal requirements and regulations

Mergers: when companies combine Horizontal Merger – joining of two or more firms competing in the same market with the same good or service Vertical Merger – joining of two or more firms involved in different stages of producing the same good or service. Conglomerate – merging of more than three businesses that make unrelated products

– a large corporation that produces and sells its goods & services throughout the world. Multinational Corporation

Multinational Corporations Advantages - Provides jobs and products around the world - Efforts to spread new technology around the world - Increase standard of living in many poor countries Disadvantages - Low wages - Poor working conditions

Franchise  Semi-independent business that pays fees to a parent company in return for the exclusive right to sell a certain product or service

Nonprofit organization  Functions like a business, but does not operate for the purpose of earning a profit

Cooperative  Owned & operated by a group of individuals for their shared benefit  Types: consumer, service, & producer  Sam’s & Costco, closest thing we have to a “ co-op”