1. Business Organizations
Chapter 3
Business Organizations

2. Jump Start Chapter 3 section 1
What is the most common form of business organization in the United States?
Sole proprietorship
Partnership
Corporation
Limited partnership
What is the main strength of the corporate form of business organization?
Ease of rising financial capital
Ease of establishment
Ease of management
Freedom from business income taxes?
A government document granting permission to create a corporation is called a
Dividend
Charter
Bond
Proxy
Basic ownership of a corporation, including voting rights, takes form of
Bonds
Preferred stock
Partnerships
Common stock
All of the following are strengths of the partnership form of business organization EXCEPT:
Limited life
Lack of special taxes

3. Sole Proprietorship
A business that is owned and managed by one individual who receives all the profits and bears all the losses.
Most common form of business organization BUT the smallest in size.
Most numerous and profitable

5. Partnerships
A business that is owned and managed by two or more individuals who receive all the profits and bear all the losses.
Numerous among business organizations
Second smallest proportion of sales and net income
General-
All partners are responsible in management and finances
Limited-
One partner is NOT active in daily business but gave money to start the business
Articles of partnership: documents that spell out how the partners divide up the profits or loses

6. Corporations
A business that is owned and operated by stockholders and has rights and responsibilities as if it were a person
90% of all businesses
Organized and recognized by law
Can buy, sell, enter into contracts, and be sued
Harder to start – need permission from the government
Includes details about Stock ownership

7. Stock holders receive no voting rights
Preferred Stock
Dividend guaranteed
Stock holders receive no voting rights
Stockholders receive dividend before common stockholders receive theirs
SH: receive investment back before common SH
Both:
Ownership certificates in a corporation
Purchased by investors called stockholders or shareholders
Provide ownership rights
Common Stock
Represents basic ownership of a corporation
Stock holders receive voting rights
No dividend received

9. Benefits of the Three Sole Proprietorship Corporation
Easy to start
Ease of management
Control over profits
Personal freedom
Lower taxes
Ease of closing the business
Psychological benefits: own you own business
Partnership
Easier to raise financial capital (through bank loans or new partner)
Partners may combine managerial skills
Easier to attract qualified workers
Corporation
Limited Liability
Greater financial capital – stocks, bonds
Unlimited life
Specialized management
Easy transfer of ownership

10. Cost of the Three Sole Proprietorship Partnership
Unlimited liability – owner responsible for all losses and debts
Difficulty in raising financial capital
Difficulties hiring (qualified) personal/stock enough inventory
Management knowledge may be limited
Limited Life/stops existing with death or owner or owner sells the business
Partnership
Unlimited liability
Shared profits
Possible conflicts between partners
Limited life
Corporation
Ownership and management are separated/shareholders have little say in running the business
Increased taxation
Difficulty in starting
Increased governmental control

11. Government and Business Regulations
Federal and state regulate interest rates and utility rates
State may offer industrial development bonds to help industries
Relocate or tax credits to draw investors

12. Jump Start Chapter 3 section 1
What is the most common form of business organization in the United States?
Sole proprietorship
Partnership
Corporation
Limited partnership
What is the main strength of the corporate form of business organization?
Ease of rising financial capital
Ease of establishment
Ease of management
Freedom from business income taxes?
A government document granting permission to create a corporation is called a
Dividend
Charter
Bond
Proxy
Basic ownership of a corporation, including voting rights, takes form of
Bonds
Preferred stock
Partnerships
Common stock
All of the following are strengths of the partnership form of business organization EXCEPT:
Limited life
Lack of special taxes

13. Review Vocabulary Chapter 3 Section 1
Sole proprietorship
Limited life
Limited partnership
Corporation
Bankruptcy
A business owned and run by one person
Business organization in which at least one partner is not active in the daily running of the business
business organization recognized by law as a separate legal entity having all the rights of an individual
A firm ceases to exist when the owner dies, quits, or sells the business
A court-granted permission to an individual or business to cease or delay debt payments

14. Review Vocabulary Chapter 3 Section 1
Sole proprietorship (A business owned and run by one person)
Limited life (A firm ceases to exist when the owner dies, quits, or sells the business)
Limited partnership (Business organization in which at least one partner is not active in the daily running of the business)
Corporation (business organization recognized by law as a separate legal entity having all the rights of an individual)
Bankruptcy (A court-granted permission to an individual or business to cease or delay debt payments)

15. Business Growth and Expansion

16. Jump Start Chapter 3 section 2
A corporation that has at least four businesses, each making unrelated products, none of which is responsible for a majority of its sales, is called
Multinational
Horizontal corporation
Conglomerate
Vertical merger
Horizontal Merger involve
Two or more firms in different countries
Two or more firms that produce the same kind of project
Two or more firms involved in different steps of manufacturing or marketing
Two or more firms that produce different products
Which of the following statements are true?
All conglomerates are multinational
All multinationals are conglomerates
A conglomerate is another term for a multinational
A multinational is often a conglomerate
Which are important for their ability to move resources, products, and financial capital across national boundaries with relative ease?
Corporations
Conglomerates
Mergers
Multinationals
What is a major reason for conglomerates mergers?
Diversification
Unlimited life
Conglomeration

17. Growth through Reinvestments
Business revenue can be used for
Investment in factories
Machinery
Technologies
Before reinvestments:
Must estimate its cash flow.
First records its total sales and then subtracts all expenses, taxes, and depreciation = net income
Net income + depreciation = cash flow (or the bottom line) real measure of business profit.
Decide to reinvest part of cash flow or addtional sales and more profits

19. Growth Through Mergers
Firms merge, one gives up it separate legal identity
Company may merge with another to
Grow faster
Become more efficient
Acquire or deliver a better product
Eliminate a rival
Change its impage

20. Growth through Mergers
Horizontal mergers: joining of firms that make the same product (Nextel and Sprint)
Vertical Merger: joining of firms involved in different stages of manufacturing or marketing

21. Growth through Mergers
Conglomerate: composed of four or more businesses
Marketing unrelated products
None are responsible for a majority of sales
Multinational: corporation with manufacturing and service operations in several countries
Subject to each nation’s business regulations

22. Chapter 3 section 2 Merger Net income Depreciation Multinational
Vertical merger
A non-cash charge a firm takes for the general wear and tear on its capital goods
A corporation that has operations in a number of different countries
Determined by subtracting expenses, including taxes, from revenue
Business combination of firms involved in different steps of manufacturing or marketing
A combination of two or more businesses to form a single firm

23. Review Vocab. Chapter 3 section 2
Merger (Voluntary association of people formed to carry on some kind of economic activity that will benefit its members)
Net income (Determined by subtracting expenses, including taxes, from revenue)
Depreciation (A non-cash charge a firm takes for the general wear and tear on its capital goods )
Multinational (A corporation that has operations in a number of different countries)
Vertical merger (Business combination of firms involved in different steps of manufacturing or marketing)

24. Jump Start Chapter 3 section 2
A corporation that has at least four businesses, each making unrelated products, none of which is responsible for a majority of its sales, is called
Multinational
Horizontal corporation
Conglomerate
Vertical merger
Horizontal Merger involve
Two or more firms in different countries
Two or more firms that produce the same kind of project
Two or more firms involved in different steps of manufacturing or marketing
Two or more firms that produce different products
Which of the following statements are true?
All conglomerates are multinational
All multinationals are conglomerates
A conglomerate is another term for a multinational
A multinational is often a conglomerate
Which are important for their ability to move resources, products, and financial capital across national boundaries with relative ease?
Corporations
Conglomerates
Mergers
Multinationals
What is a major reason for conglomerates mergers?
Diversification
Unlimited life
Conglomeration

25. Other Organizations

26. Jump Start Chapter 3 section 3
Which of the following is an example of a service cooperative?
Greenville Teachers’ Credit Union
Association of Manufacturing Workers
Better Business Bureau
Mason Chamber of Commerce
Which of the following best illustrates the indirect role of government?
A state park
A city’s fire department
The Tennessee Valley authority
Regulation of public utilities
All of the following are typical Chamber of Commerce activities except:
Educational programs
Demonstrating against new housing developments
Neighborhood clean-up campaigns
Lobbying for favorable business legislation
Which of the following is most likely NOT a nonprofit organization?
Church
Neighborhood association
Public school
Corner grocery store
Why are government controls needed on public utilities? Public Utilities
Are investor or municipal owned
Usually have no competition
Provide important public services
Are responsible for water and electric services

27. Community and Civic Organizations
Nonprofit Organization: business to promote its members’ collective interest, not seek financial gain (Bill Gates foundations)
Incorporate to take advantage of a corporation’s unlimited life and limited liability
If money remains after expenses are paid, the B.O.D. may apply to other projects

28. Cooperatives
Voluntary association of people who carry on an economic activity that benefits its members
Consumer Cooperatives: buy food and other necessities in bulk
Members donate time to the co-op
Members pay lower prices for goods
Service Co-ops: credit unions, offer services to its members at lower rates
Producer Co-ops: help members, farmers, promote or sell their products

29. Labor, Professional, and Business Organizations
Labor unions: represent workers’ interest and negotiate with management through collective bargaining
Professional association set standards for those in the profession and influence government policies on issues concern members’ interest (NCSS)
Business Associations: industries or trade associations that represent specific businesses (BBB)

30. Government Direct Role Gov’t Corp: Indirect Role:
Agencies produce and distribute goods and services to consumers such as the TVA (electricity) or US Postal Service
Gov’t Corp:
Board of directors
Congresses Money v. investors money
Indirect Role:
Regulates public utilities
Grants money to people in form of Social Security and student financial aid

31. Vocabulary Review Chapter 3 section 3
Nonprofit organizations
Cooperative
Labor union
Collective bargaining
Professional association
Negotiations between representatives of labor and management
Economic institution that works in a businesslike manner but does not seek financial gain
Organization of workers formed to represent it members interest in various employment matters
Group of people in a specialized occupation that works to improve the working conditions, skill levels, and public perceptions of the profession
Voluntary association of people formed to carry on some kind of economic activity that will benefit its members

32. Vocabulary Review Chapter 3 section 3
Nonprofit organizations
Cooperative
Labor union
Collective bargaining
Professional association

33. Jump Start Chapter 3 section 3
Which of the following is an example of a service cooperative?
Greenville Teachers’ Credit Union
Association of Manufacturing Workers
Better Business Bureau
Mason Chamber of Commerce
Which of the following best illustrates the indirect role of government?
A state park
A city’s fire department
The Tennessee Valley authority
Regulation of public utilities
All of the following are typical Chamber of Commerce activities except:
Educational programs
Demonstrating against new housing developments
Neighborhood clean-up campaigns
Lobbying for favorable business legislation
Which of the following is most likely NOT a nonprofit organization?
Church
Neighborhood association
Public school
Corner grocery store
Why are government controls needed on public utilities? Public Utilities
Are investor or municipal owned
Usually have no competition
Provide important public services
Are responsible for water and electric services