Activator – Chapter 8 Write down three occupations that you’re considering for your future. Categorize each of your choices based on who your employer might be for each job. JobEmployer

Chapter 8 - Business Organizations Business organization (firm) – establishment formed to bring goods and services to the market 3 types – 1) Sole proprietorship, 2) Partnership, 3)Corporation How do they differ? Each has different structures and levels of liability (responsibility) Liability – legal obligation to pay debts/injury settlements incurred by the business Each are engaged in bringing goods, services, or both to consumers in the market

Sole proprietorship – a business owned by one person Most common type of business organization 75% of all businesses are sole proprietorships in the U.S. Sole Proprietor

Partnership Partnership – a business organization owned by two people who agree to split responsibilities and profits Account for about 5 % of all businesses

Partnership General Partnership – partners share profits, liability and responsibility Fast food, lawyers, bars, small businesses Both workers are actively involved in the company

Partnership Limited Partnership – all partners are limited from personal liability, in the case of another partners mistakes. Legal buffer for one partner from personal liability

Partnership Articles of Partnership – outline the type of partnership, to the state, between partners.

Corporation Corporation – is a separate legal entity, or legal being, owned by individual shareholders, each of whom faces limited liability for the firms debt Shareholders face no liability for the firm’s obligations Considered is considered a separate legal entity Account for 20% of all businesses, but 90% of all products sold

Corporation Stock – a certificate of ownership in a corporation Partial owner, i.e shares, purchase 1, 1/1000 th owner of the company Closely held – privately held corporations, that do not trade stock on the public exchange Publicly held – sells stock on the market to investors in order to grow the business

Mergers Merger – combine with another company to become one entity Horizontal merger – firms in the same market with a similar good or service merge – Half and Ebay – Facebook and Instagram – American Airlines and US Airways

Mergers Vertical merger – firms join two or more firms involved in different stages of producing the same good Control all phases of the product from production to sales (monopoly)

Denied Mergers

Mergers Conglomerates – business mergers with large companies, more than three businesses

Multinationals Multinationals – large corporation that produces and sells its goods and services throughout the world

Other Organizations Business Franchise – semi-independent business that pays fees and royalties to a parent company Business is granted right to sell using the name, product and brand of the company Zaxbys, McDonalds, Subway, etc.

Other Organizations Cooperative – Co-0ps, business organization owned and operated by a group of individuals for their shared benefit

Other Organizations Nonprofit Organizations – business that gears towards benefiting society (philanthropy)

Other Organizations Labor Unions – organized group of workers whose aim is to improve working conditions, hours, wages and fringe benefits for its members.

Forms of Business Organizations Business Organization DescriptionAdvantagesDisadvantages Sole Proprietorship Partnership Most common form of business organization in the US Owned/run by 1 person Smallest in size 1.Easy to start – take an idea and start the business 2.Complete control 3.Total profits 4.Taxed once 5.No boss 1.Unlimited liability – personally responsible for all debts and business losses 2.Difficult to raise money 3.Difficulty in hiring workers 4.Inexperience 5.Lack of fringe benefits 6.Limited life (s.p. dies, business dies) Owned/run by 2 or more persons 1.Easy to start 2.2 heads are better than 1 3.Taxed once 4.Easy to borrow money 5.Easier to hire 1.Unlimited liability 2.Limited life 3.Potential for conflict

Forms of Business Organizations Business Organization DescriptionForming the BusinessAdvantagesDisadvantages Corporation Franchise Separate legal entity (person) Incorporate with the government Offer stock 1.Easy to raise money 2.May sell stock 3.Shareholders are independent 4.Limited liability 5.Unlimited life 1.More expensive to start 2.Shareholders lose control of business 3.Double taxation (taxed twice) 4.More government regulation Semi- independent business Pays fees to a parent company (McDonalds) 1.Training of owners 2.Quality products 3.National advertising 4.Financial assistance 5.Bulk purchases bring down cost 1.Royalties and fees to parent company 2.Strict operating standards 3.Buy from specific vendors 4.Limited creativity with products