Sole Proprietorship TYPES OF BUSINESS ORGANIZATION Partnerships (Limited/Gen) Corporations Non-profits
SOLE PROPRIETORSHIP- 72% OF BUSINESSES
Advantages of sole proprietorships Economic Weakness of sole proprietorship : Unlimited Liability: you have total Ease of start up Ease of Management You keep all profits You do not have to pay any business taxes Psychological advantages Ease of exit responsibility for all debts and liabilities of the company Difficulty in raising financial capital Limited size and efficiency Limited managerial experience Limited Life
STOP AND THINK If you started your own business what would it be? What are some of the 4 Factors of production you would need. § 2 examples for each Land Labor Capital Entrepreneur
9% OF BUSINESSES
PARTNERSHIPS Two major types of partnerships: General Partnership: (most common type) all partners are responsible for management and the financial responsibilities of the partnership. Limited Partnership: at least one partner is not active in the day to day running of the business. They have limited liability. Articles of Partnership: contract between partners spelling out the rules of partnership. Dividing profit Dividing responsibility Admitting new partners Buying out partners
PARTNERSHIPS Advantag es o f Partnerships : Disadvantage s of Partnershi ps Ease of establishment U nli mi ted li ability E ase of Management : each L imite d pa rtner is onl y partne r has different things t o r esponsible f or his ini tial off er inves tment. He has limi ted No spe cial business taxes liability. Easi er to rai se financial c apital L imite d L ife Larger than sole proprie to rship Conflic t bet ween partners Easi er to att ract qualifie d workers
WHAT FITS BEST WITH EACH BUSINESS? ? ? TELL ME WHY!!!
CORPORATIONS- 20% OF BUSINESS 74%PROFITS
CORPORATION- SET UP Incorporate: to form a corporation. Charter: a document granted by the state giving a corporation the right to do business Stock: shares of ownership in the corporation Stockholders (shareholders): owners of stock. Reasons to own stock: Dividends: share of corporate profits paid to stockholders Speculation: buy in hope that price of stock will increase.
STOCK
CORPORATION- OWNERSHIP Common Stock is a basic share of ownership in a corporation Have voting rights in the management of the company In reality they turn over voting rights to someone else with a proxy: giving someone else the right to vote your share of stock. Preferred Stock: Non voting shares of ownership Guaranteed dividend Liquidation benefit: If corporation goes out of business they are ahead of common stockholders in getting back money. Board of Directors: duty to direct the corporations business by setting board policies and goals Elected by common stockholders Hires a professional management team to run day to day activities. (CEO, CFO…. )
CORPORATIONS Advantages of a corporation : Ease of raising financial capital (main advantage) § Selling stock to investors § Selling bonds: a written promise to repay a loan on a specific date § Principal: the amount borrowed § Interest: the price paid for the use of another’s money § Borrowing money from banks. Ability to hire Limited liability Unlimited life Ease of transferring ownership: . Buying and selling stock is easy and is done millions of times a day Disadvantages of a corporation: Start up expenses are high. Stockholders (owners) have a limited Profits are taxed Corporations are subject to more government regulations than sole proprietors or partners
DARE TO COMPARE Using the interwoven circles list the similarities and differences between Sole Proprietorships, Partnerships, and Corporations
NON-PROFITS: WE DON’T LIKE $$$ WE JUST WANT TO MAKE YOU
WHO IS HERE TO HELP? ? ? Community and Civic organizations § Cooperatives- REI § Consumer- Sam’s Club Labor, Professional and Business Organizations Labor Unions- organization of workers formed to represent its member’s interests in varying employment matters. Collective bargaining Professional Associations- a group of people in a specialized field that work to improve their working conditions. Business associations Chamber of Commerce- promote economic growth of the community Better Business Bureau- cops for businesses
MERGERS AND ACQUISITIONS 5 Reasons to merge- Make money faster, Increase efficiency, Acquire new product lines, Catch up or eliminate rivals, Lose a company identity. Horizontal Merger- when two or more companies that product the same kind of product join forces. Vertical merger- when two or more firms that are at different steps of manufacturing process join together. Conglomerates- is a firm that has at least four businesses, each making unrelated products.
BE A THINKER NOT A STINKER With a neighbor develop 2 examples of each type of merger § Vertical § Horizontal § Conglomerate § Why would companies ever want to merge? ? 1 2 3 4 5
SUMMARY With a partner: § Use two real organizations and design the following: § A vertical merger § A horizontal merger § Conglomerate
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