1. Business Organization
Chapter 3
Business Organization

2. 3 Types of Organizations
Sole Proprietorship
Partnership
Corporation

4. Sole Proprietorship Businesses owned and run by a single individual
Easiest form of business to start
Examples: lemonade stand, lawn mowing

5. Sole Proprietorship Advantages:
You’re your own boss.
easy to start,
easy to manage,
owner can keep all the profits without sharing with other owners,
doesn't have to pay separate business income taxes, determine own hours,
easy to get out of business.

6. Sole Proprietorship Disadvantages:
owner has UNLIMITED LIABILITY!!! (full responsibility for all losses, debts, and failures),
difficult to raise financial capital,
size might make it inefficient,
owner may have limited managerial experience or financial funds
difficult to get experienced employees,
limited life span in the business.

7. Partnership Businesses jointly owned and run by two or more people
General Partnership: all partners share responsibilities
Limited Partnership: at least one partner isn't active in daily business activities
Examples: law firms, physician's groups, architectural firms

8. Partnership Advantages:
easy to start,
easy to manage,
lack of special taxes on partnership,
easy to get financial capital (you have a partner),
more efficient daily operations (ownerships can share the work load),
easier to attract talented workers

9. Partnership Disadvantages
In General Partnerships, each partner is fully responsible for actions of other partners.
In Limited Partnerships, a partner's responsibility for debts depends on size of his/her investment in the firm.
Limited life span in the business. Potential conflict between partners.
lack of resources compared to corporation
shared decision-making and profits
unlimited liability

10. Corporations
Form of business recognized by law as a separate legal entity with all the rights of an individual
Have to file for permission with federal or state government to create
Partially owned by stockholders (investors who buys ownership certificates in the firm)
Examples: Ford, GM, ABC, NBC

11. Corporations Advantages
easy to raise financial capital (can sell stocks to investors, can borrow money by issuing bonds that it will repay with interest),
limited liability for owners,
directors can hire professional managers to run the firm,
unlimited life,
easy to transfer ownership (stockholders can sell their stocks)

12. Corporations Disadvantages:
double taxation of profits (corporation pays taxes on its profits and stockholders pay taxes on money made),
difficult and expensive to get a corporation charter,
owners/stock shareholders have little to no voice in how business is run, (Even with majority stock)
subject to more government regulation.

13. Typical Corporation Stockholders (Chairperson) (President) Marketing
Board of Directors
(Chairperson)
Secretary
CEO
Treasurer
(President)
Vice President
Vice President
Vice President
Vice President
Marketing
Production
R & D
Personnel
Dept.
Supervisor
Dept.
Director
Mgr
Mgr
Of Personnel

14. Percentage of Employed
Percentage of Firms
Corporations
60%
Percentage of Employed
Sole Prop. & Part.
40%
Percentage of Sales
Corporations
20%
Partnerships 7%
Corporations
89%
Sole
Proprietorships
73%
Partnerships 6%
Sole Proprietorships 5%

16. Define:
In Chapter 3 Section 1 define the following terms:

17. Limited Liability Company
LLC – limited liability
Not a corporation – pass through entity to person(s) who own it – no double taxation

18. Franchises
Franchiser
Franchisee

19. Non - Profit Organizations
Churches & Religious organizations
Charitable Organizations - United Way – American Red Cross

20. Non - Profit Organizations
Cooperatives
consumer/purchasing - wholesale clubs
producer/marketing - agriculture

21. Non - Profit Organizations
Cooperatives
consumer/purchasing - wholesale clubs
producer/marketing - agriculture
service - credit unions, insurance, HMO, child care (fastest growing)
industrial/esops – more common in Europe

22. Vertical Integration U.S. Steel Coke fields Iron ore deposits
Steel mills
Ships
purchased by Carnegie
Coke fields
Iron ore deposits
Steel mills
Ships
Railroads
purchased by Carnegie
Coke fields
purchased by Carnegie
Coke fields
Iron ore deposits
purchased by Carnegie
Coke fields
Iron ore deposits
Steel mills
purchased by Carnegie
Vertical
Integration
U.S. Steel

23. Vertical Integration GM General Motors Assembly Manufact- uring
Refining
Transportation
Mining

24. Chrysler GM
General Motors
Ford
Horizontal
Integration

25. Economy of Scale Disadvantages of Bigness Conglomerates – next slide
impersonal
waste of resources/pollution
development of monopolies
insecurity of workers
Conglomerates – next slide
Cost/benefit analysis - ahead

26. Soft Drink Clothing Bakery Parent Company Sporting Goods Fast Food
Gasoline
Sporting
Goods
Fast Food
Conglomerate