Date post: | 28-Jan-2016 |
Category: |
Documents |
Upload: | benjamin-rodgers |
View: | 221 times |
Download: | 0 times |
Business Organizations
CH 8.1 Sole Proprietorships
Role of sole proprietorships
Advantages/Disadvantages
Sole Proprietorships
Most common form of business organizations in the US - about 75%
Business owned and managed by a single person All the profits and debts 75% of businesses, but only about 6% of total
sales
Under 25K25K-49,99950K - 99,999100K - 499,999500K - 999,9991,000,000+
Size by $$
69%
12%
8%
9%
0.9% 0.4%
Services
Finance, Insurance,Real Estate
Retail
Construction
Agriculture
Mining
Transportation
Manufacturing
Wholesale
48%13%
16%
Size by type
Advantages
Relatively easy to start up A little paperwork and some legal expenses
Some minimum requirements1. Authorization - business license
2. Site permit
3. Register the name
Advantages
Few regulations Least regulated form of business Zoning Laws
Separate areas are designated for commercial and residential uses
Owner gets all the profit Full Control Easy to get out of business
Cover debts and taxes
Disadvantages
Unlimited Personal Liability Legal obligation to pay debts
Limited access to resources Barriers to entry? Physical/ Human Capital?
Lack of Permanence Limited life expectancy? Benefits to employees Lack of experienced employees Responsibility
Partnerships CH 8.2
Business owned by two or more people
Specify division of profits and responsibilities
About 7% of all businesses in the US
5% of all sales in the US
-25K25 - 49,99950K - 99,999100K - 499,999500K - 999,9991,000,000+
59%
15%
9%
8%4%
4%
AgricultureMiningConstructionManufacturingTranspotationWholesaleRetailI, RE, Fin.Service
54%
18%
8%
9%
Types of Partnerships
General Partnership Responsibilities and liability shared equally Doctors, lawyers, construction companies
Limited Partnership Liability falls on one person
More control to the general partner Other partners only contribute $
Lose only investments
Types of Partnerships
Limited Liability Partnership (LLP)
Every partner is a limited partner
Exempts each of them from each other’s mistakes
Lawyers, Physicians, dentists, accountants
Advantages
Easy to start No written agreement necessary
Articles of partnership Spells out rights and responsibilities Sharing of profits and losses How new partners can join
Uniform Partnership Act State law to establish rules for partnerships Common ownership interests Shared management responsibilities
Advantages
Profits are shared however the partnership decides No regulations
Specialization Skills brought to business
Larger pool of capital More people means more assets Prestigious
Taxes No taxes on business, just income generated
Disadvantages
Unlimited liability Actions of one partner can jeopardize everyone
else Pick partners carefully LLP
Conflict Goals, work habits, ethics, etc. Communication
CH 8.3 Corporations, Mergers, and Multinationals
Getting people to invest in your company is another way to allow your company to grow
Corporations - the most complex of the business orgs. Legal entity owned by individual stock holders,
each of which has limited liability of debts Stock (shares) represent the portion of ownership
Corporations
Different than SP’s Defined as a separate entity
Must pay taxes Makes contracts Sues/ gets sued
20% of businesses in US 90% of all the products sold
-25K25 - 49,99950 - 99,999100 - 499,999500 - 999,9991,000,000+
AgrMiningConstrManufTranspWholesaleRetail Fin. I, REServices
$
23%
31%
19%
10%
11%
34%
17%15%
6%
p.196
Type
2 Types of Corporations
Closely Held Corporations Stock issued to only a few people Usually family members, passed down AKA - privately held corporations
Publicly Held Corporations Many shareholders who buy and sell stock
Structure
Owners elect a board of directors Directors make all the decision making Appoints corporate officers that oversee
production Officers hire managers, who hire employees
Advantages
Incorporation - forming of Corp. serves interests of both individuals and the Company Limited liability Transferable ownership Ability to attract capital Longer life
Individual advantages
Limited Liability No real responsibility
Invest your $ for a ROI, can’t lose more
Flexibility - Ability to sell your stocks and move on
Start losing money, not responsible for company debts
Advantages for Corporations
More potential for growth Easier to raise $
Sell as much stock as charter will allow Bonds - certificates sold that guarantee interest
Experts run business Long Life
Stock is transferable Can continue indefinitely
Disadvantages
Much harder to start up More expensive License - Certificate of Incorporation
(Corporate Charter) Name Statement of purpose Length of time it will run Founders’ names HQ address Method for fund raising Rules for management
Disadvantages
Double Taxation Seen as its own entity, taxed in addition to income
of individuals Tax when shares are sold too
Loss of Control More Regulation
Meetings for shareholders File quarterly reports to Security Exchange
Commission (SEC) Fed agency that regulates the stock market
Corporate Combinations
Three major types Horizontal Merger - two or more in the same
market
Combinations
Vertical Mergers - joining of different stages of production
Carnegie Steel
Combinations
Conglomerate - combination of companies that have nothing to do with each other
No one part of the business earns substantially more than the others
Multinationals (MNC’s)
HQ in one country with branches in others Must follow laws of country they are operating in
as well as pay taxes
Some of the biggest have budgets larger than Govt budgets
Advantages
Provide jobs worldwide Spread technology Improve standard of living
Influence politics, culture Low wages offered
Disadvantages
Other Organizations CH 8.4
Business franchises Semi independent Pays fees to franchisers Exclusive rights to sell products Fast food, hotels,
Advantages
Reputation Training and support Standardized quality Nationalized advertising Financial assistance Centralized buying power
Bulk saving passed on
Disadvantages
High fees/ royalties Strict standards
Hours, dress codes, procedures Purchasing restrictions
Must buy from certain approved suppliers Limited product line
Cooperatives
Owned and operated by a group of individuals for their shared benefit Three categories Consumer Co-ops
Housing, Colombia House Service Co-ops
Credit unions Producer Co-ops
Agriculture/ sell crops for you
Nonprofit Orgs.
Usually work to benefit society some how Museums, Public Schools, Red Cross,
Salvation Army, hospitals, churches
No income tax
Almost all provide a service rather than a good
Nonprofit Orgs. Some provide services to specific groups
Professional orgs - improve work conditions, image, skills American Bar Association - lawyers American Medical Association - doctors
Business Associations - promotes business interests in a particular area
Chamber of Commerce, Better Business Bureau
Trade Associations Promote interests of particular industries
Labor Unions