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:
Describe the changing status of U.S. employment
Discuss the role of business in the U.S. economy
Describe three major types of businesses

3. The Changing U.S. Job Market
Dot-com world grows
Manufacturing and agriculture decline
Employment Data:
, employment grew 6%
, 8.7 million jobs lost (great recession)
2014, jobs lost in returned

4. Baby Boomers Large # of people born 1946-1964 Dominated the workforce
Wave of retirements started (age 65)
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
Average age of US workers in 2020 will be higher than 50.
At the same time, mini-boom of younger workers will cause yr. olds to grow faster than the overall labor force for the first time in 25 years.

6. Labor Trends Continued
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

7. Wage Gap
Wage gap 
In 2013, women earned 78.3% as much as men aged 16 and over)
Calculated by dividing the median annual earnings for women by the median annual earnings for men
Source: Infoplease

8. *The National Committee on Pay Equity

9. 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
Many people work a 2nd job to make ends meet

10. 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

11. 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

12. Trends Top five career choices: Registered Nurse Software Developer
Accountants and Auditors
Market Research Analyst and Marketing Specialist
Personal Financial Advisor

13. 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

14. Trends

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
21.7 million with no employees
See figure 5-1

16. Business Size
See pg. 102

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)
Generating Ideas
A business begins with a new idea
New ideas = competitive
Research & Development
Raising Capital
Need financial resources to operate
Personal investment, loans, investors
Needs more capital as it grows – reinvested profits
Attract investors pg

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

21. Business Activities 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 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 pg. 106 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

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 Cengage
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:
Sole Proprietorship
Partnership
Corporation
Franchise
pg. 106

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: Ownership in a corporation:
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 Corpor. Limited liability Unlimited life
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 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 S

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

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 Organizing Activities include: Thinking
Gathering and analyzing information
Making decisions about all phases of the business
Set goals and strategies to achieve them
Organizing
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 Leading Activities include:
Finding, selecting, hiring, training, appraising, and rewarding the business’s employees
A.K.A = Human Resource Management
Leading
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. Write out each question with answer underlined or circled
Ch. 5 Review Problems
Pages 120/121
#s 10-23
Write out each question with answer underlined or circled