Post on 24-Dec-2015
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Bell RingerWhich of the following lists includes all
of the U.S. market structures?
A. Monopoly, Oligopoly, Imperfect Competition, Perfect Competition
B. Perfect Competition, Monopolistic Competition, Monopoly, Oligopoly
C. Oligopoly, Monopolistic Competition, Monopoly, Economies of Scale
D. Economies of Scale, Natural Monopoly, Monopolistic Competition, Monopoly
Bell Ringer February 13th Think about all the different stores in Jackson. There are many types including restaurants, clothing stores, hobby stores, supply stores, general stores, and money saving stores.
Are all the stores in Jackson structured the same (owned/created the same way)?
If yes, how are they structured? If not, how do they differ?
Brainstorm two examples that demonstrate your above answers.
Bell Ringer February 13th
What is the term?
Clues: This term is on the word wall. This term has seven syllables. It is made of two words. This term is an establishment of
selling products to consumers. This term has multiple types within
it.
Learning Objectives
Explain the characteristics of sole proprietorships.
Analyze the advantages of a sole proprietorship.
Analyze the disadvantages of a sole proprietorship.
Agree/Disagree - Write it down1. Sole proprietorships can only be owned by
one person.
2. Sole proprietorships make up only 15% of all businesses in the United States.
3. You have to get a business degree in order to start your own business.
4. Most sole proprietorships fail due to lack of freedom to do what the owner wants with the business.
Sole Proprietorship Business Organization – an
establishment formed to carry on commercial enterprise
Sole Proprietorship – a business owned and managed by a single individual 75% of ALL businesses 6% of all U.S. sales
Advantages of Sole Proprietorships Easy to Establish & Start-up (inexpensive)
Few Regulations Appropriate codes related to business
ex. health codes (food) Zoning laws may prohibit out-of-house businesses
Keep ALL profits Doesn’t have to share with stockholders or pay
special taxes Complete Control
Run it how they want to…no one else has a vote Easy to Discontinue
Disadvantages of Sole Proprietorships Unlimited Personal Liability
Liability – legal obligation to pay debts If the business fails, owner may have to sell
property to cover any debt and obligations Ex. If you take out a loan for a piece of needed
equipment, you still have to pay the loan back no matter what
Limited Access to Resources Everything comes out of you own pocket/savings May not have all the training to run every aspect
of business Ex. Really good at cutting grass, but not so good at
keep track of bills/taxes/loans/profit (paperwork in general)
Disadvantages of Sole Proprietorships Lack of Permanence
Cannot depend on someone else to maintain business Ex. If the owner dies, retires, looses interest, gets sick,
or moves – the business ceases to exist Short-term Employees
Employees are hard to keep because there is a lack of security and/or advancement
Lack of fringe benefits Fringe Benefits – payment other than wages or salary
Ex. Paid vacation, retirement payments, health insurance, etc.
Create a comparable chart.
Using your notes and a partner,
fill in this chart for each type of business that we discuss.
CAN BE USED ON YOUR TEST!
RecapProprietorships Partnerships Corporations Franchises
Characteristics
Advantages
Disadvantages
Notes
Proprietorships Partnerships Corporations Franchises
Characteristics
•One owner•75% of all U.S. Businesses
Advantages
•Easy to start-up•Few regulations•Keep ALL profits•Complete control•Easy to discontinue
Disadvantages
•Unlimited personal liability•Limited resources•Lack of permanence
Notes
•Owner is responsible for making all decisions
Bell Ringer February 14th
If you started your own business, would you do it by yourself or get a partner to help? Why?
What kind of business would you start? Why?
Agree/Disagree - Write it down1. Sole proprietorships can only be owned by
one person.
2. Sole proprietorships make up only 15% of all businesses in the United States.
3. You have to get a business degree in order to start your own business.
4. Most sole proprietorships fail due to lack of freedom to do what the owner wants with the business.
Agree/Disagree 1. Partnerships can have more than two people
in them.
2. There are multiple types of partnerships.
3. All partners share responsibilities equally no matter what.
4. Partnerships have to pay special taxes that other businesses don’t have to pay.
Learning Objectives
Compare & contrast the different types of partnerships
Analyze the advantages of partnerships
Analyze the disadvantages of partnerships
Partnership What is it?
Business organization owned by two or more persons who agree on a specific division of responsibilities and profits
Three Types General Partnership – Doctors, Accountants, Lawyers
Partners share equally in both responsibility & liability Limited Partnership
Only one partner is required to be a general partner One (or more) person(s) invests money while the other
runs it Limited Liability Partnership – Attorneys, Physicians,
Dentists All partners are limited partners (only invest)
Advantages of Partnerships Ease of Start-up
Articles of partnership legalize responsibilities & rights
Shared Decision Making & Specialization Split responsibilities, strengths, & skills
Larger Pool of Capital More physical & human capital (money & skills) More advantages to employees
Room for advancement (Lawyers can become partners eventually)
Taxation No special taxes on business, just taxation on income
(profits)
Disadvantages of Partnerships Unlimited Liability (excludes LLP)
General partners could lose everything One partner’s actions affect all partners
Limited partners only lose initial investment
Potential for Conflict Partnership agreements address technical & legal
aspects Partners must communicate openly & resolve
conflicts
Proprietorships Partnerships Corporations Franchise
Characteristics
•One owner•75% of all U.S. Businesses
Advantages
•Easy to start-up•Few regulations•Keep ALL profits•Complete control•Easy to discontinue
Disadvantages
•Unlimited personal liability•Limited resources•Lack of permanence
Notes
•Owner is responsible for making all decisions
Proprietorships Partnerships Corporations Franchise
Characteristics
•One owner•75% of all U.S. Businesses•6% of all U.S. sales
• 2 or more partners•General•Limited•Limited Liability
Advantages
•Easy to start-up•Few regulations•Keep ALL profits•Complete control•Easy to discontinue
•Easy to start-up•Shared decision making•Larger resource pool•Taxation
Disadvantages
•Unlimited personal liability•Limited resources•Lack of permanence
•Unlimited liability•Potential conflict
Notes
•Owner is responsible for making all decisions
•Pick partners carefully•Create articles of partnership
Recap
Assignment – Use same paper Complete #1-8 on page 193
Read Page 189 Answer #1-3
Closing Describe one advantage & disadvantage of a
partnership.
Corporations What is it?
Legal entity, or being, owned by individual stockholders Stock – certificate of ownership in a
corporation Dividends – portion of profits paid out to
stockholders
Entity Identity separate from that of its owners’
identities Regarded as an individual for legal
purposes Pays taxes, engages in business, makes
contracts, sues and gets sued
Corporations 20% of all U.S. Businesses Sell 90% of all U.S. products Generate 70% of all U.S. net income
earned
Corporations
TypesClosely Held Corporations (Private)
Stock is sold to few people (family members) which is rarely sold but passed on within families
Publicly Held CorporationsStock is sold on an open market to anyone
Advantages
Limited Liability for Owners (stockholders)Can only lose the amount of money invested – no more
Transferable OwnershipSell their stocks whenever they want to in order to get their investment back
Advantages
Ability to attract Capital Selling stocks raises money to buy
more capital Selling bonds
formal contract to repay borrowed money plus interest
Long Life Business doesn’t end when owners
die because it’s transferable
Disadvantages
Expensive & difficult to start Certificate of incorporation – need
legal counsel
Double Taxation Corporations pay taxes on their
income/profit Stockholders/owners pay taxes on
their income/profit
Disadvantages
Potential Loss of Control by Founders
More Regulations & Legal Requirements Annual meetings, Keep records of
everything, Quarterly & Annual Reports to Securities & Exchange Commission (SEC)
Mergers – More Efficient Corporations Horizontal Merger
Joining two or more businesses in the same market Could result in a monopoly Ex: Chrysler & Daimler Benz merged into DaimlerChrysler
Vertical Merger Joining two or more businesses in different stages of
producing the same good or service Ex: Iron Ore Manufacturing, Steel Mill, Ship Manufacturing join
into one company. Everything to make a ship is now in one firm.
Conglomerates Joining more than three businesses that make completely
different products or services Ex: Procter & Gamble – Downy, Cascade, Old Spice, Oral-B,
Puma, Iams, Tide, Pringles, Luvs, Pepto-Bismol, Puffs, Vicks, Gillette
Proprietorships Partnerships Corporations Franchise
Characteristics
•One owner•75% of all U.S. Businesses
• 2 or more partners•General•Limited•Limited Liability
Advantages
•Easy to start-up•Few regulations•Keep ALL profits•Complete control•Easy to discontinue
•Easy to start-up•Shared decision making•Larger resource pool•Taxation
Disadvantages
•Unlimited personal liability•Limited resources•Lack of permanence
•Unlimited liability•Potential conflict
Notes
•Owner is responsible for making all decisions
•Pick partners carefully•Create articles of partnership
Proprietorships Partnerships Corporations Franchise
Characteristics
•One owner•75% of all U.S. Businesses•6% of all U.S. sales
• 2 or more partners•General•Limited•Limited Liability
•Entity•Stockholders•Private or Public•20% businesses•Sell 90% products•70% net income earned
Advantages
•Easy to start-up•Few regulations•Keep ALL profits•Complete control•Easy to discontinue
•Easy to start-up•Shared decision making•Larger resource pool•Taxation
•Limited liability for owners•Transferable owners•Growth ability•Long life
Disadvantages
•Unlimited personal liability•Limited resources•Lack of permanence
•Unlimited liability•Potential conflict
•Expensive/difficult start-up•Double Taxation•Founder loses control•More regulations
Notes
•Owner is responsible for making all decisions
•Pick partners carefully•Create articles of partnership
•More potential for growth but loses personal touch
Recap
Bell Ringer
Name the three different ways to combine a corporation and
describe how they are different.
Please, use complete sentences.
Business Franchises What is it?
A semi-independent business that pays fees to a parent company (franchisers) in return for the exclusive right to sell a certain product or service in a given area.
Examples: Fast Food Chains – McDonald’s, Burger King, Sonic,
Wendy’s Restaurants – Chili’s, Olive Garden, Cheddar’s, TGIF’s Mall Stores – Kay Jeweler’s, Aeropostale, Sunglass Hut Gas Stations – BP, Shell, Love’s Truck Stop
Advantages of Franchises Built-in Reputation Management Training and Support
Allows inexperienced owners to be successful Standardized Quality
Follow certain rules/guidelines & provide certain products
National Advertising Program National campaigns paid by franchisers
Financial Assistance Some franchisers provide loans to start business
Centralized Buying Power Franchisers buy products in bulk and pass on savings
Disadvantages of Franchises Franchise Owner Sacrifices Some Freedom
Must follow franchiser’s guidelines High Franchising Fees & Royalties
Franchisers charge high fees for the right to use their name
Franchisers charge franchises for part of profits (royalties)
Strict Operating Standards Includes: hours of operation, dress codes,
operating procedures Purchasing Restrictions
Must buy products & supplies from the franchiser Limited Product Line
Only offer products approved by franchiser
Nonprofit Organizations Institution that functions much like a business
in order to benefit society, but does not operate for the purpose of generating profits
Operate with partial government support Exempt from income taxes Usually provide services rather than goods
Types Professional Organizations – NEA & American Medical
Association Business Associations – Better Business Bureau Trade Associations – American Marketing Association Labor Unions
Proprietorships
Partnerships Corporations Franchise
Characteristics
•One owner•75% of all U.S. Businesses
• 2 or more partners•General•Limited•Limited Liability
•Entity•Stockholders•Private or Public•20% businesses•Sell 90% products•70% net income earned
Advantages
•Easy to start-up•Few regulations•Keep ALL profits•Complete control•Easy to discontinue
•Easy to start-up•Shared decision making•Larger resource pool•Taxation
•Limited liability for owners•Transferable owners•Growth ability•Long life
Disadvantages
•Unlimited personal liability•Limited resources•Lack of permanence
•Unlimited liability•Potential conflict
•Expensive/difficult start-up•Double Taxation•Founder loses control•More regulations
Notes
•Owner is responsible for making all decisions
•Pick partners carefully•Create articles of partnership
•More potential for growth but loses personal touch
Proprietorships
Partnerships Corporations Franchise
Characteristics
•One owner•75% of all U.S. Businesses•6% of all U.S. sales
• 2 or more partners•General•Limited•Limited Liability
•Entity•Stockholders•Private or Public•20% businesses•Sell 90% products•70% net income earned
•Exclusive rights to sell a particular good/service•Semi-independent
Advantages
•Easy to start-up•Few regulations•Keep ALL profits•Complete control•Easy to discontinue
•Easy to start-up•Shared decision making•Larger resource pool•Taxation
•Limited liability for owners•Transferable owners•Growth ability•Long life
•Built-in Reputation•Management Training/Support•National Advertising Program•Financial Assistance•Centralized Buy Power
Disadvantages
•Unlimited personal liability•Limited resources•Lack of permanence
•Unlimited liability•Potential conflict
•Expensive/difficult start-up•Double Taxation•Founder loses control•More regulations
•Lack of Owner Freedom•High Franchising Fees•Strict Operating Standards•Purchasing Restrictions•Limited Product Line
Notes
•Owner is responsible for making all decisions
•Pick partners carefully•Create articles of partnership
•More potential for growth but loses personal touch
•Includes most food places, gas stations, mall stores, etc.
Recap
Bell Ringer
In a publicly held corporation
A. Stockholders rarely trade their stocks
B. A large number of stockholders can buy and sell stock
C. Stocks are not usually traded with the public
D. Family members are excluded from holding stock