1. Ch. 5 Business Organization  5.1 Business in the U.S. Economy  5.2 Forms of Business Ownership  5.3 Organizational Structure for Businesses

2. 5.1 Business in the U.S. Economy Goals: 1.Describe the changing status of U.S. employment 2.Discuss the role of business in the U.S. economy 3.Describe three major types of businesses

3. The Changing U.S. Job Market  Dot-com world grows  Manufacturing and agriculture decline Employment Data: http://www.bls.gov/ http://www.bls.gov/  2003-2007, employment grew 6%  2007-2009, 8.7 million jobs lost  2014, jobs lost in 2007-2009 returned

4. Baby Boomers  Large # of people born 1946-1964  Dominated the workforce  Wave of retirements started 2011  Other growth areas:  Asian  Hispanic  African-American  Currently, white non-Hispanic workers make up 68% of the labor force  Number will drop to 62% by 2020

5. Employment Trends  1960s, 35% women worked  Doubled by 2000  By 2020 nearly one half of all jobs (47%) in the U.S. will be held by women http://www.bls.gov/cps/wlf-intro-2009.htm http://www.bls.gov/cps/wlf-intro-2009.htm

6. Pressures on Employees  Economic stress led to downsizing of the number of people employed by companies  Companies streamlined production and implemented cost-cutting procedures  Employees take on new tasks, work extra hours

7. Pressures continued  Wage rates decreased  People forced to find second jobs  Family/career  7 of 10 parents feel they can’t spend enough time with their kids  Increased use of contingent workers  One who has no explicit or implicit contract for long-term employment  About 5% of U.S. workforce (6 million)  Projected to double in 10 years

8. Trends  Technology in telecommunications careers rapidly growing  Top five career choices:  Wind turbine service technicians  Occupational therapy assistants  Physical therapist assistants  Physical therapist aides  Home health aides  http://www.bls.gov/ooh/fastest-growing.htm http://www.bls.gov/ooh/fastest-growing.htm

9. Trends  Top five career choices:  Registered Nurse  Software Developer  Accountants and Auditors  Market Research Analyst and Marketing Specialist  Personal Financial Advisor   http://www.careerprofiles.info/top-careers.html http://www.careerprofiles.info/top-careers.html

10. Trends  Since 1999, unemployment gradually grown  Diversity – more immigration from other countries  More women in the workforce  But wage gap is 79 cents to the dollar as compared to men

11. Trends  Demand for legal services in increases growth 13%  School teachers growth by 13% between 2008-2018  DOL fastest growing occupations  Network systems, data communications  Computer software engineering  Mental health and social workers  H.S. Diploma jobs,  Health aides  Physical therapy aides  Dental assistants  Medical assistants

12. Trends  MI jobs – Sept. 3 million + (mo. Of Sept.) -13,000 mo. Change over year - 7,000  Unemployment 13% (Sept.)  May-Sept. jobless rate remained unchanged  Oldest of 79 million baby boomers turn 61 this year (retirement 65-67)  2008-2018 32.8% of Asian women working

13. Trends  11 states in Sept. reported increase in unemployment, 16 states had no change, 23 states decreased  Productivity down 1.8% for 2 nd qtr.  Top 6 Careers for 2010  Healthcare  Education  Interactive design  Childcare  Energy

14. Trends  4 th qtr. Commercial and admin. Jobs increase  Non-farm payroll down 95,OOO (Sept.)  Top job growth – Healthcare 811,059 new jobs  2009 2 + million jobs outsourced to other countries  2008 unemployment rate for women 5.4%  3.7 Asian  4.9 Caucasian  A.A. 8.9  Hispanic 7.7

15. Business & The Economy  U.S. business were responsible for almost 20% of the $77.6 trillion of goods and services produced in 2014! Size of Businesses:  Most U.S. business are quite small

16. Business Size

17. Roles of Business  Provide employment  Wages then are used to purchase goods/services  Business profits used to compensate owners & investors  Pay taxes to local, state, federal govt.  Govt. uses the tax $ to provide services  Clean water, streets, schools  Most important – make & distribute products & services we consume

18. Impact on a Community  Businesses pays wages to workers  Buys goods and services from other businesses  Other businesses congregate by a new, large business to support that business  Successful businesses contribute to more jobs, income, and a thriving economy

19. Business Activities (6) 1.Generating Ideas  A business begins with a new idea  New ideas = competitive  Research & Development 2.Raising Capital  Need financial resources to operate  Personal investment, loans, investors  Needs more capital as it grows – reinvested profits  Attract investors

20. Business Activities 3.Employing and Training Personnel  Need human resources  Recruit, hire, train (as business changes)  Pay wages, benefits, and employment taxes 4.Buying Goods & Services  Businesses buy many services like:  Advertising, legal & accounting, maintenance, security

21. Business Activities 5.Marketing Goods & Services  The activities directed at providing the goods and services wanted by a business’s customers  Without marketing, even the best products remain unsold!

22. Business Activities 6.Maintaining Business Records  TAKE ACCOUNTING!!!  Records help track performance  Customers need info. about orders and payments  Businesses are required by govt. to pay taxes (keep records)  Technology is a big help

23. Types of Businesses  Producers:  Create the products and services used by individuals and other businesses  A business that uses resources from nature for direct consumption or for use in making other products is an extractor  Pump oil, mine coal, etc.

24. Producers  Farmers cultivate land and use other natural resources to grow crops and raise livestock for consumption  Manufacturers get supplies from other producers and convert them into products (sell to consumers and other businesses)

25. Intermediaries  Businesses involved in selling the goods and services of producers to consumers and other businesses.  Retailers and Wholesalers Producer Wholesaler Consumer Retailer Consumer

26. Service Business  Carries out activities that are consumed by its customers  Does not offer products for sale  Dentists, Physicians  Lawyers, Accountants  Hair Stylists, Pet Sitters  People & businesses use service businesses  Fastest growing part of the economy! (60% of U.S. employment = service)

27. Pg. 105 Assessment 1. The largest number of U.S. businesses employ 2. Which of the following is not one of the common activities of all businesses? 3. A retailer is an example of…

28. 5.2 Goals/Objectives  Understand the 4 major forms of business ownership.  Determine advantages and disadvantages of each form of ownership.  Recognize other specialized business ownership forms.

29. 5.2 Business Ownership  A business must organize to produce goods and services for the consumer  Types of Business Ownership: 1.Sole Proprietorship 2.Partnership 3.Corporation 4.Franchise

30. Sole Proprietorship  A business owned by one person  Small firms - Less than 50 people employed  Can easily be managed by owner  Few legal requirements  Sole control  Owner receives all profits & debts!  More than 2/3 (66%) of U.S. businesses are operated as sole proprietorships  Most common form

31. Requirements for Starting  Knowledge of industry area  What type of small business is going to be successful and profitable?  What goods/services do consumers need?  Equipment  For physical facility  For creating goods  Business name? Permit or license?  Little capital needed

32. Sole Proprietorship  Must account for income and expenses  Pay taxes on profits  Tax advantage  All income is taxed as a part of your personal income  Business expenses can be used to reduce the income (tax write-offs)

33. Advantages of a Sole Proprietorship  Easy to open  Little capital  Profits for the owner  No one to share with!  Tax advantages  Only taxed on personal level  Control and flexibility  Establish own hours  Make hiring decisions  Make product development decisions  You are your own boss!

34. Advantages Continued  Easy to close  You choose when the time is right to close the business  Pride and satisfaction of owning your own business!

35. Disadvantages of a Sole Proprietorship  Liability the personal responsibility you assume for something - you are entirely, totally responsible for any and all consequences (the owner can be sued personally)!  Your personal assets could be at risk  All debts are yours to pay!  Limited Capital  It’s just you and your investment

36. Disadvantages Continued  Limited Capabilities  Limited to your ideas and strategies alone  Uncertain life  What will happen to the business if you pass away

37. Partnership  A business owned and managed by a small group, (more than 2 people)  Partners decide what each will contribute (investment) and what each will get out of that investment  About 1 1/2 million in the U.S.  Used less than other forms  Purpose of forming a partnership:  Join capital  Join experience  Join the abilities of 2 or more people

38. Partnership Agreement  Partners should have an attorney prepare a partnership agreement to help prevent future problems  Rights and responsibilities of each partner  Contributions of each partner  Division of authority of each partner  Division of profit for each partner  Length of partnership agreement  Actions to take if partner dies or becomes unable to continue the business

39. Advantages of a Partnership  Easy to open  Increased capital  Your resources + someone else’s  Combined capabilities  Decreased competition  If together, you do not have to compete against one another  Reduced expenses  Tax advantages  Taxed on personal level

40. Disadvantages of a Partnership  Liability  Uncertain life  Difficult to share profits  Your investment = 60%--Your partner’s investment = 40%--Do you split the profits using the same percentages?  Disagreements  Difficult to end  What if one person wants out?  Limited capital  What the partners are able and can contribute

41. Corporations  A business owned by a number of people and operated under written permission from the state in which it is located  Articles/Certificate of Incorporation  Corporation’s Name  Corporation’s Purpose  Location  Amount of stock to be issued  Names of the Board of Directors  Invisible, intangible and existing only in the eyes of the law (an individual)  Few compared to sole proprietorships  Only 15%-20% of businesses are corporations  Over 80% of all business is done by corporations

42. Corporations  Ability to:  Borrow or loan money  Buy and sell goods  Make contracts  Sue or be sued  Ownership in a corporation:  Individuals (stockholders) can share in profits by buying shares of stock  Represent ownership in the corporation  Stockholders risk only the amount they invest  Shareholders receive dividends (part of the profit earned by the corporation)

43. Advantages of Corporations  Limited liability  Only responsible for your personal investment in the company (your personal assets are not at stake)  Unlimited life  The corporation will still survive with changing personnel (owners)  Easy to transfer ownership  Through selling stock - ownership  Skilled personnel  Highly trained and prepared  Financial power

44. Disadvantages of Corporations  Difficult to form and operate  Separate owners and managers  Varied opinions and strategies = +, -  More complex requirements (govt.)  Taxation  The corporation is taxed twice  At the individual’s level with owning shares  At the corporate level for the business entity

45. Limited Liability Partnership  Identifies some investors who cannot lose more than the amount of their investment  Not allowed to participate in the day- to-day management of the business  Difficult and costly

46. Joint Venture  Unique business organized by two or more other businesses to operate for a limited time for a specific project  Type of partnership

47. S Corporation  Offers the limited liability of a corp.  All income passed through to the owners based on their investment  Taxed on individual tax returns

48. Limited Liability Company  LLC  Provides liability protection for owners  Similar to corp.  No article of incorporation or bylaws are needed

49. Nonprofit Corporation  Group of people who join to do some activity that benefits the public  Education  Health Care  Charity  Free from corporate income taxes  Raise funds through grants and donations  Organized as a corp. – govt. must approve

50. Cooperative  Owned by members, serves their needs, and is managed in their interest  Members form Cooperative to:  purchase goods and services cheaper as a group rather than individually  Business Cooperative forms to:  Market the products produced by members  Purchase products needed by members  Large numbers of small businesses has greater bargaining power than individual small businesses

51. Franchise  A written contract granting permission to sell someone else’s product or service in a prescribed manner, over a certain period of time, and in a specified territory  Method of distributing goods/services through licensing agreement  Between franchiser (parent company, owner of name) and franchisee (one who buys right to sell products) according to the contract agreement (franchise)

52. Franchise  Large amount of capital needed to purchase  Failure rate 5% as compared to 50% for independent businesses

53. Advantages of a Franchise  Assistance provided  Product has traditional features, packaging, advertising, etc. that remain the same across each franchise  Brand name well known  McDonalds  Holiday Inn  Century 21  Promotional support  Management training  Greater chances for success  5% vs. 50%

54. Disadvantages of a Franchise  Large amount of capital to purchase  $$$$  Pay royalties or % of profit  To franchiser  Uniform policies  Less independence and decision- making power  Restrictions

55. Managing a Successful Business  Managers are responsible for coordinating resources within a business  Human capital - laborers  Natural resources - turn resources into goods  Management activities are focused in five (5) key areas:  Planning  Organizing  Staffing  Leading  Controlling Do you want to be a manager?

56. Management Roles  Planning  Activities include:  Thinking  Gathering and analyzing information  Making decisions about all phases of the business  Set goals and strategies to achieve them  Organizing  Activities include:  Determine what work has to be done and who is doing each job  Delegate responsibility to others who are skilled in each area (job task)

57. Management Roles  Staffing  Activities include:  Finding, selecting, hiring, training, appraising, and rewarding the business’s employees  A.K.A = Human Resource Management  Leading  Activities include:  Influencing people to act  Inspiring workers to perform their jobs  Using good human-relation skills  Using effective communication skills

58. Management Roles  Controlling  Activities include:  Answers the question, “Is the business accomplishing the goals it set out to reach in the planning stage?”  Compares what actually happened to what was planned  Examines and analyzes feedback  Applying standards set back in the planning stage  Evaluates the success of decisions made  Reports results of comparisons

59. Key Concepts  Page 113  # 1-4  Write in complete sentences  Turn in  Turn in your 5.2 notes packet

60. Ch. 5 Review Problems  Pages 120/121  #s 10-23  Write out each question with answer underlined or circled