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