C HAPTER 8: B USINESS O RGANIZATIONS

_mods.php?PROGRAM= &VIDEO =-1&CHAPTER=8

S ECTION 1: S TARTING A B USINESS Making money off your ideas and hard work Be your own boss Set your own hours

G ETTING S TARTED An entrepreneur is a person who organizes, manages, and assumes the risks of a business in order to gain profits Profit is money left from revenue after expenses have been paid New small businesses are called startups and many are entitled some form of financial assistance from the government  the government wants to promote economic growth Small business incubators are available in some neighborhoods to provide cheap rental property and equipment to startups through federal aid

E LEMENTS OF B USINESS O PERATION Four basic elements of business operation are: Expenses - equipment, wages, insurance, taxes, electricity, telephone, wi-fi…. Advertising - Costs a lot to build a customer base, but then your customers advertise for you Record Keeping- accurate records of receipts and expenses are important, especially for tax purposes Risk - Many startups fail. It is a definite risk. For many, the trappings of success are worth the risk.

S ECTION 2: S OLE P ROPRIETORSHIPS AND P ARTNERSHIPS Businesses are organized in a variety of ways according to how profits and risk will be shared. Sole proprietorships Partnerships Franchises Corporations

S OLE P ROPRIETORSHIPS Businesses owned and operated by one person

P ARTNERSHIPS Business that two or more people own and operate Limited partnership- special form of partnership where one or more of the partners has limited liability, but that is because he/ she has little or no say in the everyday business operations  silent partner/ financial backer Joint venture- partnership set up for a specific purpose and for a limited period of time- 

S ECTION 3: T HE C ORPORATE W ORLD AND F RANCHISES Only 20% of American businesses are corporations, but they account for 89% of total business revenue in the US * Case study- Focus on Free Enterprise- Home Depot, pg 258

W HAT IS A C ORPORATION ? A type of business organization owned by many people but treated by law as though it were a person; it can own property, pay taxes, make contracts, and so on People can buy stocks, or shares of ownership in a company, in hopes of making a profit off the company The company uses the money it makes from stock sales to expand the company Stockholders have limited liability (they can only lose the amount they initially invested ), but also limited say in day to day operations

Ex.- General Electric- General Electric made more than $14 billion last year, but still paid no taxes and received a $3.2 billion tax benefit from the IRS. You can own a piece of General Electric for just $120, and you can reap the rewards, the profits, of one of the world’s most profitable appliance companies. General Electric, however, isn’t as patriotic as one might hope  General Electric recently moved one office to Bermuda to avoid paying corporate taxes in the US

W HY F ORM A C ORPORATION ? To expand your business to get the latest technology to capture a larger share of the market to charge less for your products to avoid the hassle of dealing with partners and their opinions

C ORPORATE S TRUCTURE Must register corporation with the state government Articles of Confederation Corporate Charter Must sell stock Common stock Dividend Preferred stock Must elect a board of directors

W HAT IS A F RANCHISE ? A franchise is a contract in which a franchiser sells to another business the right to use its name and sell its products. Pro- you are buying into an established product Con- you have limited say in production and marketing Examples: McDonald’s, Dunkin Donuts