1. BUSINESS STRUCTURES

2. What are factors of production?
Productive resources
What is required to produce goods and services that people want.
Natural resources
Human resources
Capital goods
Entrepreneurship

3. What is entrepreneurship?
A characteristic of people who assume the risk of organizing productive resources to produce goods and services.

4. What is a free enterprise system?
The unhindered use of privately owned resources to earn profits
5 important characteristics:
1. economic freedom
Freedom to prosper w/i a country w/o intervention from a govt or economic authority
2. voluntary exchange
Buyers and sellers freely and willingly engaging in market transactions
3. private property rights
The owners exclusive authority to determine how property is used
4. profit motive
Motivation of businesses that operate as to maximize profits
5.competition
Rivalry among sellers

5. Why would an entrepreneur want to start their own business?
Profit
Be their own boss
Pride in ownership
Meet customers needs
Often they are risk takers

6. Group work “starting a business”
Each member will have own color marker
Each member will have a couple of minutes to list types of business ownership
You can also comment on each other’s “tweets”
APPROPRIATELY!!!
Write your name on the back in the same color that you wrote your comments in.

7. Business ownership opportunities
If you were to start your own business what would it be?
How would you enter a business?
Four ways:
Purchase an existing business
Take over a family business
Start a new business
Purchase a franchise
What organizational form will it take?

8. Forms of business organization
Sole Proprietorship- A business owned by one person who receives all the profits and is responsible for all the debts incurred by the business
Partnership- A business with two or more owners who share the firm’s profits and losses.
Corporation- A legal entity owned by shareholders whose liability for the firm’s losses is limited to the value of the stock they own.
Franchise- A legal agreement to sell a parent company’s product or service in a geographic area.

9. Sole Proprietorship
Advantages
Disadvantages
All business decisions are the owner’s
Low start-up costs
All profits go to the owner
Greater freedom
Very little government control (keep accurate tax and employee records)
Income taxes
Unlimited liability- personally responsible for any losses
Long working hours
Difficult to obtain financial capital
All business decisions and risks are the owner’s
Limited life span

10. partnership Easy to form Low start-up costs Divided liability
Advantages
Disadvantages
Easy to form
Low start-up costs
Divided liability
Easier to obtain financial capital
Opportunity to gain complementary skills
Income tax
Unlimited liability (in a general partnership
Divided authority
Divided profits
Can be difficult to find the right partner
Potential disagreements among partners
Limited life span

11. Corporation Limited liability Specialized managerial functions
Advantages
Disadvantages
Limited liability
Specialized managerial functions
Easier to raise financial capital
Perpetual existence
Freely transferable shares of stock
Greater government regulation
Expensive to organize
Double taxation
Not easily dissolved
A lot of paperwork
Extra costs for lawyers, fees, etc

12. corporations
Charter – a government document that gives permission to create a corporation
Stockholders – purchases share or shares of ownership in a corporation.
Public vs. Private
Public – is a company who offers its securities for sale to the general public.
Private – are owned by a relatively small number of shareholders who owns stocks that are not traded publicly, many are family-owned.
“S” Corporations- is treated as a partnership and not as a corporation for tax purposes. It requires Articles of Incorporation which outlines the primary rules governing the management of a “S” corporation

13. franchise Proven idea Brand name Support from franchisor
Advantages
Disadvantages
Proven idea
Brand name
Support from franchisor
Exclusive rights
Established relationships with suppliers
Financing may be easier than starting from scratch
Restrictions from franchisor
Royalty fees – a percent of the gross profits
May be expensive to own and operate
Stiff penalties from franchisor if business is sold or closed
Added costs for legal and accounting services
Loss of individuality

14. Profit vs. nonprofit
Profit organizations use resources to produce goods and services in hope of earning a profit for their owners.
Ford Motor Company
Nonprofit organizations work in a businesslike way to promote the collective interests of its members rather than to seek financial gain for its owners
American Red Cross

15. Nonprofit organizations
Community or civic organizations – ex. Churches, schools
Cooperative – Consumer, Service, Producer – Bulk Stores, Credit Unions, Farmers Markets
Government- helping to make sure the economy runs smoothly while providing goods and services.
Other organizations
Labor Unions- United Auto Workers (UAW), an economic institution that represents an organized group of workers (by industry or by type of worker regardless of the industry) to negotiate with management by means of collective bargaining.
Professional organizations – American Marketing Associations (AMA)
Business Organization – Chamber of Commerce, Better Business Bureau (BBB)

16. How is business ownership impacted by the market economy?
When times are good
Hire more people
Expand
Reinvest in their company
This is true in a small business or large.
When economy is weak
Lay off workers
Less likely to expand
Spend money for fear of not being able to recoup any investment dollars.

17. Liability:
The most common situation is debts owed when a business experiences financial difficulties or fails
If a business is not fully insured, there is the possibility of loss due to disaster or lawsuits.
Unlimited Liability- the owner’s personal assets can be used to pay for any debts of the business.

18. Finance options:
Corporations have more options when they need to obtain additional financing.
Sole Proprietorships and Partnerships – only source of money is often personal assets. (maybe able to borrow money from family members, friends, or a bank)
Corporations- issue more stock
Easier to borrow money through loans
Can issue corporate bonds

19. Tax implications:
Corporations- deduct full cost of employee benefits (medical insurance), which reduces corporate tax liabilities
Taxed as a separate entity that pays tax on its income
Stockholders also pay a personal income tax on dividends they receive
Sole Proprietorships and partnerships – not permitted to deduct these costs directly from their business income
Can be a major disadvantage
Pay individual tax on their companies earnings

20. Table partners: Read each Client
Prepare a written recommendation to which business organization you believe to be the best for each client.
Make sure you provide reasons for your recommendation
We will discuss as a class when finished.