1. Topic 5, Business & Labor

2. How can businesses & labor best achieve their goals?
What if you’re one of the lucky ones who is able to turn something you really love to do into a business?
One of many challenges will be finding out the best way to organize your business.
Business organization: ownership structure of a company or firm

3. Sole Proprietorship Business owned and managed by a single individual
Most popular in USA
More than 70 percent of all businesses
Most are small
Generate about 4 percent of all sales in USA

4. Sole Proprietorship Business owned and managed by a single individual
Most popular in USA
More than 70 percent of all businesses
Most are small
Generate about 4 percent of all sales in USA

5. Sole Proprietorship

6. Using the graph, how would you describe the size of most sole proprietorships?

7. Sole Proprietorship Advantages Disadvantages
Easy to start and end
Relatively few regulations
Sole receiver of profit
Full control
Unlimited personal liability
Limited access to resources
Lack of permanence
You’re going to die

9. 5.2 Partnerships
Business organization owned by two or more persons who agree on a specific division of responsibilities & profits
In the USA, partnerships account for nearly 10 percent of all businesses
Generate a quarter of all income earned

10. Partnership Advantages Disadvantages Unlimited liability
Ease of start-up
Financial impact
More than one person paying
Improved ability to borrow
Shared decision making
Unlimited liability
Unless LLP
Potential for conflict
Lack of permanence
You die and your partner leaves…

13. Franchise
A business franchise is a semi-independent business that pays fees to a parent company
In return, the business is granted the exclusive right to sell a certain product or service in a given area

15. Franchise Advantages Disadvantages Sacrifice freedom
Reputation built-in
Training and support
Quality
Advertising
Financial assistance
Some franchisers offer financial startup support
Centralized buying power
Buy in bulk, pass on to franchise locations
Sacrifice freedom
High franchising fees & royalties
A share of their earnings
Strict operating standards
Purchasing restrictions
Limited product line

16. So you want to own a Taco Bell…

17. $750,000: How much you need in liquid assets for Taco Bell to even approve you to become a franchisee.
$1,500,000: Your minimum net worth in order to open a franchise.
$45,000: The fee you must pay to Taco Bell to own a franchise.
$1,200,000: The average start up and construction costs to build a new Taco Bell. Could be as high as $2.5 million.
$175,000: How much it costs to acquire an already existing Taco Bell. Could be as high as $1.4 million.
$1,400,000: The yearly sales of an average Taco Bell.
$116,000: What it costs to open a Subway instead.

19. Certificate of ownership in a corporation
Corporations
A legal entity, or being, owned by individual stockholders, each of whom has limited liability for the firms debts
Stockholders own stock
Most complex form of business organization
Certificate of ownership in a corporation

21. Corporations
In the US, corporations account for about 20 percent of all businesses but more than 80 percent of all sales
60 percent of net income earned
Most large businesses do incorporate

23. Corporation Advantages Disadvantages Difficult and expensive to start
Advantages for stockholders
Limited liability
Flexibility in terms of ownership (easily transferable)
Advantages for corporations
Potential for growth
Bonds (promise to repay borrowed $ with interest
Long life
Can hire experts to run it
Difficult and expensive to start
Double taxation
Dividends
Original owners loss of control
More regulation
Annual meetings
Keep records of all transactions

24. Corporations
Horizontal Mergers: two or more firms competing in the same market with the same good join (Office Depot & OfficeMax)
Vertical Mergers: firms involved in different stages of producing the same good join together
Conglomerate: three or more unrelated businesses are involved

27. Nonprofits
Function like a business organization but do not operate for the purpose of generating profit
No owner
Board of directors
Exempt from income taxes
Cannot issue stock

28. Labor Force
Labor Force: nonmilitary people who are employed or unemployed
Over the past two decades, US economy has shifted from manufacturing economy to service economy

30. Employed or Unemployed?
Employed if you are 16 years or older and meet at least one of the following:
Worked at least one hour for pay in the past week
Worked 15 or more hours without pay in a family business
Held jobs bud did not work due to illnesses, vacations, labor disputes, or bad weather
Unemployed if you don’t meet this criteria and are either temporarily without work or are not working but have looked for jobs within the last four weeks.
Outside the labor force:
Discouraged workers: once sought work but have given up
Full time students
Stay at home parents
Retirees, institutionalized, active military