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Business Organizations
Ch. 8
Overview
• Section 1: Sole Proprietorships• Section 2: Partnerships• Section 3: Corporations, Mergers, &
Multinationals• Section 4: Other Organizations
Sole ProprietorshipsSec. 1
• Key Vocabulary– Business organization– Sole proprietorships– Business license– Zoning law– Liability– Fringe benefits
• Objectives:– Describe characteristics of
a Sole Proprietorship– Analyze advantages &
disadvantages of a Sole Proprietorship
Characteristic of a Sole Proprietorship
• Business owned & managed by a single individual• That’s it…just one owner, thus the word “sole”
• Nifty facts to know:– Most entrepreneurs started out as sole
proprietors– 75% of businesses in US– Only 6% of all US sales
Sole Proprietorship
• Advantages:– Easy to setup– Few regulations– Owner gets the profits
after taxes– Owner has full control– Easy to discontinue
• Disadvantages:– Unlimited Personal
Responsibility– Limited access to
resources– Lack of permanence
Section 2: Partnerships
• Key Vocabulary– Partnership– General partnership– Limited partnership– Limited liability
partnership (LLP)– Articles of partnership– assets
• Objectives:– Describe characteristics
of the three main types of partnerships
– Analyze advantages & disadvantages of a partnership
Characteristics of a Partnership
• Business organization owned by two or more persons• All agree on specific division of responsibilities and profits• Three types:
– General – Limited– Limited liability
• Nifty facts to know:– About 7% of all businesses in US– 5% of all sales– 10% of all income earned in US in a year
Partnerships
• Advantages:– Ease of setup– Few regulations– Shared decision making
and specialization– Larger pool of capital – No special taxes
• Disadvantages:– Unlimited liability unless
you’re an LLP– Potential for Conflict b/t
partners
Section 3: Corporations, Mergers, & Multinationals
• Key Vocabulary– Corporation– Stock– Closely held corporations– Publicly held corporations– Certificate of incorporation– Dividend– Horizontal merger– Vertical merger– Conglomerate– Multinational corporation
• Objectives:– Describe characteristics of a
corporation– Analyze advantages &
disadvantages of incorporating
– Compare & contrast types of corporate combinations
– Describe role of multinational corporations
Characteristics of a Corporation• Legal entity, or being, owned by individual stockholders (or shareholders)
– Like an individual, a corporation • pays taxes• can engage in business• can make contracts• can sue and be sued
• Types of Corporations– Closely held: examples are Mars Candy, Rolex, LEGO, IKEA– Publicly held
• Nifty facts to know:– 20% of all businesses in US– 90% of all sales – 70% of all income earned
Typical Corporate Structure
• Owners: people who buy stock• Board of Directors: elected by stockholders• Corporate Officers: appointed by Board• Managers: hired by Corporate officers• Employees: hired by managers
To incorporate or not to incorporate
• Advantages of incorporating– Limited liability– Transferable ownership– Ability to attract capital– Owners don’t need
special skills, just money– Long life
• Disadvantages of incorporating– Expensive & difficult to
start up– Double taxation– Loss of control– More regulations
Mergers
• Sometimes companies want to joint together or one wants to buy a competing company. Sometimes a company buys another company just to make more money.
• Types of Mergers– Horizontal
• Not many examples today b/c gov’ts fear monopolies
– Vertical• Examples: American Apparel, ExxonMobil, Apple
– Conglomerate • Examples: Boeing, Comcast, Dow Chemical, Procter &
Gamble, Time Warner, Trump Organization, Viacom
A word about Multinationals
• Companies that operate in more than one country
• Typically the largest corporations
• Why would a corporation want to operate in more than one country?
• Are there any disadvantages to operating in more than one country?
A few famous multinationals, to name a few
• Activision Blizzard• AMD• Apple• Aeropostale• Baskin-Robbins• Bic• Billabong• Black & Decker• Boeing• Bridgestone• Capital One • Caterpillar• Coca-Cola• Costco• Dell• Dunkin’ Donuts• Facebook• Ford• Google
• Johnson & Johnson• Krispy Kreme• L’Oreal• McDonald’s• Mattel• Michelin• Microsoft• Motorola• Nestle• Nike• PepsiCo• Red Bull• Samsung• Sony• Southwest Airlines• Starbucks• Toyota• Wal-Mart
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