Business Organization Sole Proprietorship, Partnerships and Corporations.
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Transcript of Business Organization Sole Proprietorship, Partnerships and Corporations.
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Business Organization
Sole Proprietorship, Partnerships and Corporations
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Four Elements of a Business
1. Expenses2. Advertising3. Receipts and Record Keeping4. Risk
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Calculating Profits
Revenue - Expenditures = Profit
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Sole Proprietorship
Business owned by one person 73% of all businesses
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Advantages/Disadvantages of a Sole Proprietorship
Advantages Receive all profits Decisions all yours (management) Lower tax rates Personal satisfaction
Disadvantages Losses not shared Unlimited liability Must make all decisions Very time consuming Financial capital usually low When owner dies – business usually closes
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Partnership
A business that two or more individuals own and operate.
Many professional occupations are partnerships (ex. doctors, dentist, etc.)
Types of Partnerships1. Limited Partnership2. Joint Ventures
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Advantages/Disadvantages of Partnership
Advantages Losses shared More efficient – work in expertise Lower taxes than corporations Combines capital investment of two people
Disadvantages Share profit If one partner cannot pay; the other is liable Must be able to get along Capital borrowing is limited to combined assets of the two partners Financial capital usually low If a partner dies – must be ended or reorganized
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Corporations
An organization owned by many people but treated by the law as though it were a person.
In order to be a corporation:1. Register with the state government2. Sell stock3. Elect Board of Directors
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Corporation continued
Selling Stock:1. Common Stock – voting rights/dividend?2. Preferred Stock – no voting rights/dividend guaranteed; first claim if
bankrupt Elect Board of Directors – hires officers to corporation NASDAQ; NYSE; Dow Jones
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Starting a Corporation
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Dow Jones Industrial Average
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Corporate Structure - Example
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Corporation continued
Franchises A contract in which a franchisor sells to
another business the right to use its name and sell its product
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Advantages/Disadvantages of Corporation
Advantages Stockholders do not have devote time to company to make
money Limited liability Management is divided among many people Can issue stock to raise capital
Disadvantages Decision making can be slow Corporate profit is taxed Individual stock owners have very little say in company Corporation can continue indefinitely
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Business Growth and Expansion
Growth Through Reinvestment
– Income statements – report showing business’s sales, expenses, net income and cash flow
Chapter 3 Section 2
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Growth Through Mergers
– Horizontal Merger – (pg. 75)
– Vertical Merger– Conglomerates – at least 4 businesses – unrelated (ex. Disney – see next slide)
– Multinationals BP, Royal Dutch Shell, Nabisco
$8.5 billion
$1 Billion
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Conglomerates in the U.S.
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Non Profit Organizations
Community Organizations and Cooperatives– Cooperatives
Consumer cooperatives Service cooperatives Producer cooperatives (farm cooperatives)
Chapter 3 Section 3
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Labor, Professional and Business Organizations
– Labor Unions Collective Bargaining
– Professional Associations American Medical Associations (AMA)
– Business Associations Better Business Bureau (BBB)