Types of Business Organization

Sole
Proprietorship
Partnerships
TYPES OF BUSINESS (Limited/Gen)
ORGANIZATION
Corporations
Non-profits
SOLE PROPRIETORSHIP- 72% OF
BUSINESSES
Advantages of sole Economic Weakness of sole
proprietorshi p :
proprietorships
U n l i m i t e d L i a b i l i t y: y o u h av e t o t a l
Ease of start up
r e s p o n s i b i l i ty f o r a l l d e b t s a n d
Ease of Management l i a b i l i t i e s o f t h e c o m p a ny
You keep all profits Difficulty in raising financial
You do not have to pay any capital
business taxes Limited size and efficiency
Limited managerial experience

P s y c h ol og i c a l a d v a n t a g e s
Limited Life
Ease of exit
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
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
Ad van t ages o f P a r t ne r s hips : D i sa d van t ag es o f P a r t n e r sh i ps

E a se o f e st a b l ish men t U n l i m it ed l i a b ilit y
E a s e o f M a n a g em en t : e a c h L i m i te d p a r t n e r i s o n l y
p a r t ner h a s d i fferent t hings t o re s p o ns ible fo r h i s i n i tial
o ffer i nve s tm ent. H e h a s l i m ited
No sp e c i a l b u si n e ss t a x e s l i ability.
E a si e r t o r a i se f i n a n c ial c a p i t al L i m i te d L i f e
L a r g e r t h a n so l e p r o p r i e to rsh ip C o n f l i ct b e t w een p a r t ners
E a si e r t o a t t r a c t q u a l i fie d
w o r ke r s
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 owner ship 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 owner ship
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 : Disadva nta g es of a

corpor a tion:
Ease of raising financial
capital (main advantage)
Start up expenses are high.
Selling stock to investors
Selling bonds: a written Stockholders (owners) have
promise to repay a loan on a
specific date a limited
Principal: the amount
borrowed Profits are taxed
Interest: the price paid for the
use of anothers money Corporations are subject to
Borrowing money from banks. more government regulations
Ability to hire
Limited liability than sole proprietors or partners
Unlimited life
Ease of transferring
ownership: . Buying and selling
stock is easy and is done
millions of times a day
DARE TO COMPARE
Using the interwoven circles list the similarities and

dif ferences between Sole Proprietorships, Partnerships, and
Corporations
NON-PROFITS: WE DONT LIKE
$$$ WE JUST WANT TO MAKE YOU
WHO IS HERE TO HELP???
C o m m u n i t y a n d C i v i c o r g a n i z a t i on s
Cooperatives- REI
Consumer- Sams Club
L a b o r , P r o f e s s i o n a l a n d B u s i n e s s O r g a n i z a t io n s
L a b o r U n i o n s - o r g a n i z a t i o n o f w o r ke r s fo r m e d t o r e p r e s e nt i t s m e m b e r s
i n t e re s t s i n va r y i n g e m p l o y me nt m a t t e r s. C o l l e c t i v e b a r g a i n i n g
P r o f e s s i o n a l A s s o c i a t i o n s - a g r o u p o f p e o p l e i n a s p e c i a l i ze d f i e l d t h a t w o r k
t o i m p r o ve t h e i r w o r k i ng c o n d i t i o ns.
B u s i n e s s a s s o c i a t i on s
C h a m b e r o f C o m m e r c e - p r o m o t e e c o no m i c g r o w t h o f t h e c o m m u ni ty
B e t t e r B u s i n e s s B u r e a u - c o p s fo r b u s i ne s se s
MERGERS AND ACQUISITIONS
5 Reasons to merge- Make money faster, Increase ef ficiency,

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 dif ferent
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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Sole

You keep all profits Difficulty in raising financial

You do not have to pay any capital

business taxes Limited size and efficiency

Limited managerial experience

If you started your own business what would it be?

Two major types of partnerships:

Articles of Partnership: contract between partners spelling out

Ad van t ages o f P a r t ne r s hips : D i sa d van t ag es o f P a r t n e r sh i ps

L a r g e r t h a n so l e p r o p r i e to rsh ip C o n f l i ct b e t w een p a r t ners

Incorporate: to form a corporation.

Reasons to own stock:

Common Stock is a basic share of owner ship in a corporation

Elected by common stockholders

Advantages of a corporation : Disadva nta g es of a

Using the interwoven circles list the similarities and

5 Reasons to merge- Make money faster, Increase ef ficiency,

Horizontal Merger- when two or more companies that product

Conglomerates- is a firm that has at least four businesses,

With a neighbor develop 2 examples of each type of merger

Why would companies ever want to merge????

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